TRUMP FORGETS THE FORGOTTEN

South_Mountaineer

Jan 25, 2017 at 2:32pm

terp said:

South_Mountaineer said:

The government set up a program to provide affordable mortgage insurance. It is setting the interest rates for its program, which is not the same as “the government intervenes in the market place to lower interest rates”. Now, you may disagree with various government actions which support home ownership, but as you know the FHA insurance program isn’t the most prominent example of that.

As mentioned several times, this isn’t about relaxing lending standards, so that’s irrelevant bordering on a red herring for purposes of this discussion.

Your last paragraph is too vague to comment on. Sure, as a general principle either acting or not acting can cause problems. I guess we’ll disagree that the existence of the FHA program in 2017 will “ultimately … cause problems” as an abstract proposition.

What are you talking about? FHA loans make loans available to people with much poorer credit history than the free market would. Here's a link talking about how great it is that standards are loosening up since the downturn. How soon we forget.

Again, the topic was FHA insurance, not lending standards.

It helps to understand the difference between FHA insurance and lending standards, and the difference between a borrower who can afford the mortgage but needs mortgage insurance, and a borrower who can't afford the mortgage.

The article you cite is about lenders being willing to accept borrowers who are closer to the existing minimum standards, not that the minimum standards have changed.

terp

Jan 25, 2017 at 8:38pm

Housing is being reflated, but during the housing bust FHA delinquencies were much much higher. I would expect more of the same when and if housing takes another downturn.

Mortgage Insurance underwrites risk of default. Of course, this will affect those who will qualify. This isn't hard. I misspoke about standards, however riskier loans are being approved. That is the point. It is highly suspect to think that these loans would happen without the default being mitigated ultimately by the taxpayer.