No doc loans are back

NEW -> Contingent Buyer Assistance Program
I always thought FHA loans were not as bad the subprime loans written during the boom because the underwriting was stricter. But, I guess with everyone losing there job they need to bring back liar loans to be able to dish out the money.

Does anyone know what percentage of new loans are FHA?
 
Mcdonna1980 said:
I always thought FHA loans were not as bad the subprime loans written during the boom because the underwriting was stricter. But, I guess with everyone losing there job they need to bring back liar loans to be able to dish out the money.

Does anyone know what percentage of new loans are FHA?
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Here is the reality of most subprime loans...the majority were actually fully documented loans and were closely watched for loan exceptions (from what I've heard and read). The problem with the subprime loans is the same problem what exists with FHA loans in my mind....low credit rating of the borrowers. In addition to FHA loans allowing borrowers with low credit scores, they also allow a very low down payment requirement (3-5%). One of the big problems that got us into the housing mess that we are in is that borrower had none of their capital ("skin in the game") at risk so any small drop in price wipes out their equity in the blink of an eye. The same concept holds true for commercial real estate as it does for residential real estate....the "cash" equity the borrower brings to the table, the lower the chance that they walk away from the property. Although great credit scores doesn't necessarily mean that a person has financial capacity to service debt (like we will see when Alt-A loans will start imploding), bad credit scores are a good indicator as to the expected future payment history of a borrower.

Another thing that scares me is that a lot of those idiot mortgage brokers that pushed option-arms, Alt-As, etc are now pushing FHA loans because they make a good amount of money on them. I've already read articles of how there are significant increases of defaults and fraud related to FHA loans originated in 2008 vs. 2007 & 2006. The second potential buyer for my condo was approved for an FHA loan and were only going to put down 5% (their credit scores were in the high 500s) so that's why I wanted the first buyer to buy my property.

Now that being said, I have no problem will lenders offering no-doc loans for folks who put 40-50%+ down on a property.
 
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