December 8, 2009

From Thirty To Fifty And Fifty To Thirty For FHA Condo Loans In 2010

While nearly unheard of just a few years ago, FHA backed loans in the Bay Area have become more common (along with associated defaults).

A couple of condo related FHA rule changes that went into effect yesterday: up to 50 percent of a building’s units can now be purchased with FHA-backed loans, the rule returns to 30 percent at the end of the year; and at least 30 percent of units in a new development need to be pre-sold before it will become eligible for FHA-backed loans, the rule returns to 50 percent at the end of the year.

Also, buildings in which more than 10 percent of units are owned by a single investor or 15 percent of units are more than a month behind on their HOA’s will not qualify.

US (But Not DA) Prime And FHA Mortgage Defaults Climbing [SocketSite]

First Published: December 8, 2009 1:30 PM

Comments from "Plugged In" Readers

Good, we need to do everything we can to make this housing recovery sustainable. This will definitely help push the sale of multi-unit developments.

Posted by: SFhighrise at December 8, 2009 1:43 PM

^^^

Sustainable recovery? Are you joking, or just daft? You mean keeping the bubble artificially inflated. No worries, the government is obviously keen on doing just that. There is no real recovery here, folks. Might as well call it what it is: a centrally planned housing economy.

It's like a chronic alcoholic saying they're "recovering" because so far they've only had 10 shots of vodka today vs. 12 yesterday (although the day's not over yet).

They should just stop screwing around with all this minutia and pass a law that home prices are no longer allowed to fall. If you try to buy a place for less than the seller paid, you have to pay a huge fine or something, maybe 2x the drop in price.

Why try to even maintain the appearance of an independently functioning market? The charade is getting old. Just move straight to price-fixing and get it over with already.

Posted by: Legacy Dude at December 8, 2009 2:14 PM

There is nothing so sad as a bear (even temporarily) cheated out of the schadenfreude he feels he so justly deserves! It's enought to make me feel...schadenfreude!

Posted by: Dan at December 8, 2009 2:28 PM

Meta schadenfreude!

Who said SocketSite wasn't urbane and sophisticated?

I feel a haiku coming on...

Posted by: Kurt Brown at December 8, 2009 2:37 PM

FHA backed loans
Make Bear cry out in Winter,
Schadenfreude karma.

Posted by: Happy in SF at December 8, 2009 2:53 PM

Take 3 percent now
FHA print 97 later
Cheap bragging to friend

Posted by: t at December 8, 2009 3:42 PM

FHA Condo
Pee and money wash away
In cold winter rain

Posted by: OneEyedMan at December 8, 2009 3:55 PM

No bloodlust here, gang - I'm highly liquid with no debt and a ton of savings. Could've bought in '05, can buy even more now, but won't buy til it makes sense vs. renting, or the natural economic fundamentals support it.

I am, however, frustrated that my tax money (and yours, BTW) is being wasted to keep that metaphorical alcoholic drunk as long as possible, with no real recovery in sight. That's tax money that could be building mass transit, going to improve education, health care, or a myriad of other uses that could benefit all of us. Instead, it's being used to keep shelter overpriced. Someone care to explain how that benefits society?

Posted by: Legacy Dude at December 8, 2009 4:19 PM

schadenfreude or not, it will be interesting to watch all the "surprised" reactions when FHA needs a bailout. FHA was designed as a first-time homebuyer program to help low to middle income people into a home.

It was not designed to "save" a national housing crisis, especially not in high income places.

Thus, there should be no surprise when it crashes.

Just like it's no surprise if things turn out badly when you hire a social worker to launch a spaceship. The social worker is a great person, but completely untrained to launch said spaceship.

Thus far I've seen a lot of bandages to hold things together until they "get back to normal" with "normal" being the bubble years of 2005-6. Unfortunately, we have not made structural changes necessary to improve our economy.

thus I am not optimistic. I have no interest in schadenfreude, especially when being proven "right" means pain and misery for millions of people including those I love.

The govt is using FHA to bail out the banks. if/when it fails we'll all pay dearly.

Posted by: ex SF-er at December 8, 2009 9:01 PM

Indian summer
The Bear abandons his den
Ahead, bitter tears.

Posted by: diemos at December 8, 2009 9:12 PM

The haiku stuff is getting stale. Could we please switch to limericks?

Posted by: Legacy Dude at December 9, 2009 10:19 AM

There once was a fellow named Legacy Dude
To internet poets he was somewhat rude
The haiku got old
or so we were told
now both forms appear and we're doubly screwed

Posted by: The Milkshake of Despair at December 9, 2009 11:02 AM

I don't think that housing prices should be artificially supported for their own sake. The problem is that a sudden crash wipes out the financial system, which causes layoffs, which causes people to lose their homes, which worsens the financial crisis. It is a legitimate government task to try to prevent a new Great Depression caused by this cycle. Especially after bad government policy allowed the crisis to happen in the first place. The challenge is to rescue the economy now without setting up future instability.

Posted by: Dan at December 9, 2009 11:35 AM

Ha ha...thanks Shake, that works.

Dan, I totally agree that the policy goal should be general stability based on sustainable practices. I don't think we have that, and the delinquency rates on FHA loans agree with me (~25% nationwide IIRC). The government is trying to ice a cupcake with a concrete trowel, and the effect will be Bubble 2.0. if they're not careful. Don't even get me started on moral hazard.

Posted by: Legacy Dude at December 9, 2009 12:37 PM

Clearly our government has chosen to attempt to spend more money to paper over the structural problems in our economy through massive deficit spending and government guarantees of everything. I never would have guessed we'd go so far. Quantitative easing and purchase of MBS by the Fed? It's a shame LMRiM is gone - I know he said it would never happen (or that the consequences would be catastrophic). Would love to hear what he thinks now. Ex-SFer, you're my only hope!

Posted by: Po Hill Jeff at December 9, 2009 1:45 PM

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