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FHA loans draw comparison to sub-prime

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Mortgage Professional America | 23 Sep 2015, 06:30 AM Agree 0
One big bank exec has put FHA mortgages on blast – and is calling for increased regulation
  • Michael | | 23 Sep 2015, 11:41 AM Agree 0
    So, Chase can't be competitive and their answer is to whine about smaller lenders who are kicking their butt. And he admits that they are up-pricing the mortgages which means Chase is punishing borrowers who are not as qualified on a program that is GUARANTEED by the Federal Government. The bottom line is they want to keep ripping people off and when smaller lenders are more competitive and better serve American homebuyers, Chase disparages them and tries to convince us that they are somehow superior. Shame on them.

    Why don't you mention the settlement with FHA last year where you got caught screwing up FHA mortgages? Guess your superior knowledge of regulations didn't help you there. Same old Chase...scum.
  • Jeff | | 23 Sep 2015, 11:52 AM Agree 0
    Michael seems to be whining more than Chase. The fact is that scores below 620 ARE considered subprime, and those types of mortgages were a contributor to the 2008 meltdown. I sell all of our long-term financing mortgages into the secondary market. Not a single investor I use for FHA mortgages will buy one with credit scores below 620, and I'm fine with that. 520 with only 3.5% down is asking for a default. And what's worse, make that mortgage per FHA guidelines and if it defaults for any reason, FHA holds that against you on your rating. When I first started in this business in 1992, over 90% of my mortgages were FHA and today it is less than 5%. As for the guaranty, he is right. It is guaranteed by FHA, and they are pretty quick to pay a claim, but you also will have to wait an average of 2 years for them to pay out on your legal expenses. It just isn't that great a program in today's world and because of the MMI, it truly is a mortgage of last resort.
  • David Abrahamson | | 23 Sep 2015, 12:02 PM Agree 0
    FHA did not cause the crash or it would have started 70 years ago. Subprime did not cause the crash. Alt A lending was the cause. Further, these so called journalists and credit experts need to get the facts right. Any FHA mortgage with a FICO below 580 requires a 10% down payment and has for a good while now.
  • Griff | | 23 Sep 2015, 12:11 PM Agree 0
    Well, everyone has an opinion.... Subprime played a bigger part in the housing crash in some parts of the country I'm sure. My experience is FHA mortgages was a great contributor. I did a bunch of 80/20 mortgages and I don' t know of any of those that failed. But FHA mortgages continued to be a problem well into 2010 because they did not tighten up when the conventional mortgages did. For a full year I saw a bunch of brokers doing a boatload of FHA's because they were looser on everything including the appraisal process. Those mortgages continued to collapse for years.

    Under 580 is sub prime in my book. I have lenders pushing them, but they are a ton of work and if you are putting down a minimal amount there is nothing to keep one in the house when things start going bad. We do not need this in today's environment. Everyone deserves the opportunity to learn to be a home owner, but paying bills on time is part of that process. Sure some thing can happen that would be devastating to your credit, but you need to work through it and recover to a reasonable comfort level then buy a home.
  • Chuck S | | 23 Sep 2015, 12:13 PM Agree 0
    Watters need to be investigated as he clearly protesteth too much. What is he talking about? These clowns have paid millions and millions in fines and penalties so he wants to throw us "small lender" under the bus....are you kidding me. What a child. Like the prior post so accurately indicates, they have perpetrated massive fraud themselves, paid fines and penalties as a result and have no way to compete because his pathetic leadership caused processes that make the home mortgage process impossible. Hey Mr. waters, apparently you are too busy at the country club to notice that ONLY we small lenders have to comply with NMLS licensing requirements which include education, testing and credit reports where your mortgage originators do NOT. As a result, many banks (none Chase) in our market have hired "less than honest" originators that can NEVER pass the requirements to get licensed as a Independent. Nice work Wattes, you have revealed a lot in your comments and none of it honorable. Jeff, you don't have a clue what you are talking about. These mortgages are not "guaranteed" they are insured. There is a difference. They did not "cause" the so called 2008 melt down. Further, nice to see how quick you are to throw first time buyers and low-moderate income buyers under the bus. This is the people you apparently support in DC that wrote this lower FICO requirement NOT us small lenders. I am not saying I agree with 520 but please, get a clue and Get educated.
  • Henry Martinez | | 23 Sep 2015, 12:22 PM Agree 0
    Do not forget that FHA mortgages below 620 fico scores have to qualify at DTI of 31 over 43 and have to be manually underwritten. Stricter
    qualifying ratios than fannie mae or freddie mac. Typical whining from big bank executive's who have had the upper hand since the meltdown and now will be subjected to same playing field as brokers with new TRID. It is about time...
  • Todd | | 23 Sep 2015, 03:04 PM Agree 0
    I see both sides of the FHA argument but just remember HUD is supposed to be designed to help the "under served" get into housing. So why is FHA the most expensive mortgage program available?
    Enough of that. I want to understand how ANYONE in the mortgage banking industry could be so dumb or perhaps so blind as to make the statement that they are more regulated than an originator. Complete opposite of reality and laughable to everyone in our industry. Might want to step out of your office and enter the real world or stop making ignorant statements.
  • Robert | | 05 Oct 2015, 01:45 PM Agree 0
    FHA is and always has been the domain of the first time homebuyer who for the most part are sub prime borrowers. Nothing wrong with that. FHA just did not keep up with mortgage amounts which is what gave rise to sub prime lending. David is correct that FHA did not cause the crash as they were a non participant. What caused the crash was first the unfettered investor lending to anyone (whom all became overnight speculators not even legitimate long term investors) who could fog a mirror and the W2 stated wage earner program. Come on. Either you made the income or you didn't. However, all these fraudulent programs were federally sanctioned so what did you expect!
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