Cheap is small and not too steep But best of all cheap is cheap Circumstance has forced my hand To be a cut price person in a low budget land Times are hard but we'll all survive I just got to learn to economize
I'm on a low budget I'm on a low budget
The Kinks -- Low Budget
When the conforming limit for GSE and FHA loans went down in October, borrower spending power went down with it. In response to the dramatic drop off in demand, Congress has voted to increase the FHA loan limit back to $729,750 through 2013.
(Reuters) - The U.S. Congress on Thursday approved a bill to raise the maximum size of mortgages the Federal Housing Administration can insure and sent it to President Barack Obama to sign into law.
The measure would push the so-called FHA conforming loan limit in the highest-priced real estate markets back up to $729,750 through 2013, from $625,500, a sign of lawmaker concern over the still-depressed state of the housing sector.
It's far more than a sign of concern, it's an acknowledgement of the weakness in the market for high wage earners, a market that didn't used to get government support.
The FHA has been perverted. It used to provide home ownership opportunities for low and middle income Americans. It was never intended for supporting overpriced markets dominated by high wage earners like here in Irvine. Markets with prices requiring loans over $417,000 are supposed to be supported by savings and equity from previous sales. Since most Americans have no savings, and since home equity has been largely wiped out in the crash, the markets for high wage earners are looking for the government to bail them out.
This policy will undoubtedly cause more FHA losses because prices will continue to decline, and with the tiny down payments on FHA loans, borrowers will go underwater and many will strategically default. In short, this policy will shift losses from the private lenders and investors to the taxpayer -- to you.
The limits, which vary from market to market, were temporarily raised for FHA and Fannie Mae and Freddie Mac during the financial crisis when banks became reluctant to lend. They automatically dropped back on October 1.
Lawmakers decided not to raise the loan level for Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB), which have soaked up about $169 billion in taxpayer aid, as they sought to strike a balance between supporting the market and starting to shrink the government's housing footprint.
The only silver lining to this policy is that it does not apply to GSE loans. It creates an unusual situation where FHA loans will proliferate despite their higher costs due to the FHA insurance.
Many buyers who don't have a 20% down payment (or who aren't willing to put that much down) can now bid up prices using FHA loans assuming they have the qualifying income. This will be an advantage to high wage earners who haven't saved much.
Of course, it is another government prop, and when it is removed, the artificial demand it creates will disappear with it, so buyers thinking of using this financing should beware.
Seeking to avoid a polarizing debate, members of the House and Senate decided to link the mortgage measure to must-pass legislation that includes funding for a large swath of federal programs, from food inspection to law enforcement.
The bill passed the Republican-controlled House of Representatives on a 298 to 121 vote, and passed the Senate by a vote of 70 to 30.
This was "must pass" legislation, so that washes their hands of responsibility, right? Political posturing is bullshit. These idiots just passed a measure which will certainly result in major losses to the FHA -- the same FHA facing a government bailout soon. This is a stealth bank bailout nobody has the courage to take responsibility for.
FHA, which does not make loans, provides mortgage insurance to borrowers without enough of a down payment to qualify for prime loans. With an FHA loan, home buyers can put down as little as 3.5 percent.
The agency, which is mainly funded through insurance premiums it brings in, backed about one-third of loans used to purchase homes last year.
FHA, Fannie Mae and Freddie Mac have seen their share of the mortgage market swell as private lenders retrenched; they now back about 90 percent of all new residential loans.
The measure to raise the FHA loan limits still has to pass the Senate before becoming law; Senate approval could come as early as Thursday night with lawmakers laboring against a November 18 deadline, when current government funding expires.
The Obama administration and many lawmakers of both parties want to reduce the government's role in supporting the housing finance system, and the White House sees expiration of the higher loans limits as a first step.
Some Republicans splintered from their party's general consensus that the government should no longer risk the cost of subsidizing home loans on a grand scale. Lawmakers from states with pricey real estate markets, such as California and New York, argued that withdrawing support could hurt the market.
California Republicans should hide their faces in shame. This is appalling. These Republicans call for reducing the footprint of government and simultaneously vote to keep the house prices inflated in their districts with more government largess.
The housing industry and consumer advocates mounted an intense lobbying effort to convince officials the time was not yet ripe to reduce government support.
The NAr will always argue for more government support. The mistake was made by the congressmen who listened to them.
Some conservative groups fought raising the loan limits, with the influential Club for Growth warning that the government was distorting the market and impeding a recovery.
Yes, it is distorting the market and impeding the recovery. This is a mistake.
FHA, which traditionally has supported low-to-moderate income households, said on Tuesday that its capital reserves had dwindled over the past year. But it rebutted the contention of some analysts that it will likely need to turn to the U.S. Treasury for a bailout.
(Additional reporting by Andy Sullivan; Editing by Dan Grebler)
The FHA will likely need a bailout despite their assurances to the contrary. As I reported recently, the only way they will avoid a bailout is if the market bottoms shortly and their legions of underwater loan owners do not strategically default. When their market prognostications prove to be wishful thinking, they will go back to congress for a bailout and claim no one could have foreseen the continuing fall in prices. Idiots.
Countrywide encouraged a peak-buying Ponzi
This house illustrates how fortunes are made and lost during a Ponzi scheme. Two owners ago, this property was purchased on 12/13/2004 for $695,000. Only 15 months later on 3/3/2006, the owner sold the property for $853,000 pocketing over $100,000 after commissions for his one year of ownership. That's the fun part.
The owner that followed was the bagholder... or was he. He paid $853,000 but he did it with Countrywide's money. He put nothing down. In fact, Countrywide didn't think that deal was good enough, so five months later, they gave him a new $748,000 first mortgage and a $93,500 HELOC. Then a few weeks later, they increased his HELOC to $187,000 enabling him to pull nearly $100,000 out himself -- after only owning the house less than six months.
It isn't hard to see why houses were so popular and why Countrywide went out of business.
------------------------------------------------------------------------------------------------------------------------------------------- This property is available for sale via the MLS. Please contact Shevy Akason, #01836707 949.769.1599 sales@idealhomebrokers.com
Irvine House Address ... 3531 PECAN St Irvine, CA 92606 Resale House Price ...... $639,900 Beds: 4 Baths: 3 Sq. Ft.: 2505 $255/SF Property Type: Residential, Single Family Style: Two Level, Traditional Year Built: 1974 Community: Walnut County: Orange MLS#: S679920 Source: CRMLS Status: Active On Redfin: 9 days ------------------------------------------------------------------------------ Rare highly upgraded, Turnkey REO in College Park. Double family rooms with fireplace. New Carpet and Paint, Newer cabinets with granite counters in kitchen and baths, Newer dual-pane windows, crown molding and much more. This home has a large open floor plan and has beautiful flooring throughout. This home sits on a large lot with a spa in the back yard. Low HOA dues and no Mello Roos. Hurry with your highest and best offers because this gem will not last long. ------------------------------------------------------------------------------------------------------------------------------------------- Proprietary IHB commentary and analysis
Resale Home Price ...... $639,900 House Purchase Price … $489,000 House Purchase Date .... 9/20/2001
Net Gain (Loss) .......... $112,506 Percent Change .......... 23.0% Annual Appreciation … 2.6%
Cost of Home Ownership ------------------------------------------------- $639,900 .......... Asking Price $127,980 .......... 20% Down Conventional 4.02% ............... Mortgage Interest Rate $511,920 .......... 30-Year Mortgage $123,592 .......... Income Requirement
-$397 .......... Tax Savings (% of Interest and Property Tax) -$735 .......... Equity Hidden in Payment (Amortization) $179 .......... Lost Income to Down Payment (net of taxes) $100 .......... Maintenance and Replacement Reserves ============================================ $2,340 .......... Monthly Cost of Ownership
Cash Acquisition Demands ------------------------------------------------------------------------------ $6,399 .......... Furnishing and Move In @1% $6,399 .......... Closing Costs @1% $5,119 .......... Interest Points $127,980 .......... Down Payment ============================================ $145,897 .......... Total Cash Costs $35,800 ............ Emergency Cash Reserves ============================================ $181,697 .......... Total Savings Needed -------------------------------------------------------------------------------------------------------------------------------------------------------
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The only silver lining to this policy is that it does not apply to GSE loans. It creates an unusual situation where FHA loans will proliferate despite their higher costs due to the FHA insurance.
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This house illustrates how fortunes are made and lost during a Ponzi scheme. Two owners ago, this property was purchased on 12/13/2004 for $695,000. Only 15 months later on 3/3/2006, the owner sold the property for $853,000 pocketing over $100,000 after commissions for his one year of ownership. That's the fun part.
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