Congress Shoots Down FHA Mortgage Program

FHA Mortgages -- Hawk ProgramFHA mortgage borrowers and American homeowners will have fewer opportunities for success in the coming year as a result of the newly-minted 2015 budget bill. You won’t see such a headline anywhere but if you check page 1,560 of the just-approved federal budget you will find language which shows how Washington really works.

“SEC. 235. None of the funds made available by this Act nor any receipts or amounts collected under any Federal Housing Administration program may be used to implement the Homeowners Armed with Knowledge (HAWK) program.”

Wow. Somebody on Capital Hill sure doesn’t like the HAWK program. It must do terrible things. Maybe it spreads Ebola or helps ISIS.

Oh wait, the HAWK program simply makes it easier for first-time homebuyers to get an FHA mortgage — and that means more demand and perhaps higher prices for American home sellers.

What The FHA HAWK Program Does

Scheduled to start in 2015, the HAWK program says if you are a first-time buyer and will take a homeowner class and make your mortgage payments on a full and timely basis for a few years the FHA will slash the insurance premiums it charges. For most borrowers this will mean a savings of about $325 a year and nearly $10,000 over the life of the loan.

This is not a giveaway. Having better-educated borrowers and borrowers who make proper payments means fewer claims against the FHA, something which saves money and results in fewer foreclosures. Fewer losses also opens the possibility of lower FHA mortgage insurance premiums, something that would surely stimulate home sales.

Perhaps some representative was confused and thought they were putting an end to the Global Hawk drone program. After all, both “Global Hawk” and the “Homeowners Armed with Knowledge (HAWK) program” contain the word “hawk,” so you can see how this could happen.

Congress Loves Banks — And Derivatives

Congress had no trouble at all passing legislation which will allow big banks to trade derivatives and keep the profits. The same legislation effectively says taxpayers will have to clean up any losses. The notational value of outstanding derivatives held by US banks was $236.8 trillion as of mid 2014.

That’s trillion — not billion. We’re looking at the biggest potential bail-out since Noah grabbed a bucket.

Of course, no worries. Accounts always balance out. There’s no possibility of a loss. Well, maybe sometimes. Just think of the $6.2 billion London Whale incident. Or the $4.4 billion lost by Long-Term Capital Management.

Taxpayers and Self-Interest

Where’s your self-interest? If more first-time buyers enter the housing market doesn’t that mean the value of your home is more likely to go up? And if big banks can swap derivatives and have losses that require a taxpayer bailout out how do you benefit? Does the value of your home increase? Does America create more jobs? Does your household income go up?

Just how much money did you make from derivatives trading last year? Oops, household incomes are lower today then in 1999. You remember, that’s 15 years ago.

Here are three facts you might like to know:

  • According to Ellie Mae 19 percent of all closed mortgages in October were insured by the FHA. Who benefits if we make the FHA program less appealing?
  • First-time buyers were responsible for 29 percent of all existing home purchases made in October according to the National Association of Realtors. That’s down from the traditional level, about 40 percent. If we do not have more first-time buyers coming into the market then who will buy your existing home? How will you move up or move out? How will you get a higher price? NAR also says that “despite an improving job market and low interest rates, the share of first-time buyers fell to its lowest point in nearly three decades and is preventing a healthier housing market from reaching its full potential.”
  • “Americans’ job approval rating for Congress averaged 15% in 2014, close to the record-low yearly average of 14% found last year,” according to a Gallup survey released this morning. “The highest yearly average was measured in 2001, at 56%. Yearly averages haven’t exceeded 20% in the past five years, as well as in six of the past seven years.”

Will the final budget that goes to the President contain the anti-FHA language and the swap legislation? Think of it this way: How many lobbyists and how much PAC money are behind the swap provision? Now ask yourself: How many lobbyists and how much PAC money represents mortgage borrowers and the average American homeowner? Just ask your representative or senator….

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