“The inventory of new homes for sale is at a record low and there are many areas of the country that are approaching a housing shortage. Tight credit conditions are preventing builders from meeting this emerging demand, putting workers back on the job and helping the economy move forward.” according to the NAHB.

Really? So, for example, we should have higher loan limits for FHA loans? That would do a lot for housing demand. Only .75 percent of all FHA loans were for more than $500,000 as of mid-September. Even fewer borrowers need or want loans above $625,500, the new single-family loan limit.

“Further exacerbating the situation is today’s pervasive anti-housing climate in Washington,” said NAHB Chairman Bob Nielsen.

Is that so? Name 10 “anti-housing” Republican congressional representatives and 10 “anti-housing” Democratic House members. If these folks are against housing do you mean they want people to live on the streets?

“Leaders in Washington must stop scaring consumers by talking about eliminating the mortgage interest deduction, ending a federal backstop for housing and calling for a minimum 20 percent downpayment on home loans,” said Nielsen. “This is counterproductive and harms consumer confidence, the housing market and the nation’s economy.”

Who, exactly, is talking about eliminating the mortgage interest deduction? Where is the scare? Where is the legislation which says — like Canada — that home mortgage interest will no longer be deductible for any reason by anyone?

Or, is the worry that rich folks will get less of a deduction? And if that’s the case, why is that bad for someone making $50,000 a year? Or someone without a job?

And about ending the “federal backstop” for housing? If that’s a problem speak to the special interests over at the Mortgage Bankers Association. They’re concerned — get this — “that the FHA programs will be over-utilized.” Where oh where would borrowers get their mortgages if FHA insurance was less available?

And no one is calling for a 20-percent minimum downpayment for ALL mortgage loans, no matter how often such a claim is repeated.

Under Wall Street reform — the Dodd–Frank Wall Street Reform and Consumer Protection Act — VA mortgages, FHA loans, and conventional loans sold to Fannie Mae and Freddie Mac are all within the definition of a qualified residential mortgage or QRM. Today you can generally get FHA financing with 3.5 percent down, nothing down with a VA loan and 5 percent down with conventional mortgages.

What the new rules say is that if lenders want to pump risky loans into the market such as option ARMs, interest-only mortgages or financing based on no-doc loan applications then they should have more skin in the game. That means a 5-percent reserve under the new rules for lenders who want to originate high-risk loans and 20 percent down for borrowers. The idea is to prevent lenders from again coming back to taxpayers asking for a bailout.

If home builders want to help the housing sector here’s a place to start: Make mortgage subsidiaries and other controlled lending entities illegal for home builders. Make sure no builder — directly or indirectly — receives compensation or a thing of value from any loan to any home buyer.

Washington Special Interests and Mortgage Loans is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

Technorati Tags: 20 percent, bailout, Dodd, down, downpayment, Frank, home builders, loan, minimum, mortgage, mortgage bankers, payment, risk

The alleged culprit in this matter is the Dodd-Frank Wall Street Reform and Consumer Protection Act. Having failed to prevent its passage, the lending industry is now trying to undo it piece by piece.

So what’s the big deal?

Wall Street reform establishes conditions under which lenders can be sued by borrowers. However, the law also says if lenders play by the rules they are protected against such suits if they make loans inside the safe harbor specifically created by the new rules.

The Safe Harbor

Loans inside the safe harbor are called qualified residential mortgages or QRMs. Despite claims that borrowers will soon only be able to finance with at least 20 percent down, the QRM rules say exactly the opposite.

To understand why you need to know which mortgages are inside the safe harbor. These loans include:

1. FHA loans with 3.5 percent down.
2. VA loans with as little as nothing down.
3. Conventional loans with as little as 5 percent down; that is, loans sold to Fannie Mae and Freddie Mac.
4. Portfolio loans, mortgages originated and held by lenders.

Not only will there be some loans available with little down under Wall Street reform, MOST loans — about 80 percent — will be available with little down. How do we know? Laurie Goodman with the Amherst Securities Group has testified before Congress that in total our mortgages are worth $10.6 trillion. Of these, $5.4 trillion are insured by Fannie Mae, Freddie Mac or Ginnie Mae and another $3 trillion are in lender portfolios.

Lender Reserves

The problem for lenders concerns the 20 percent of all loans outside the safe harbor. When high-risk loans are made outside the safe harbor lenders must set aside 5 percent of the loan amount as a reserve. Money in a reserve generates less income then would otherwise be possible, and that’s a huge issue for lenders.

In essence, lenders want the right to make high-risk, high-profit loans with little or no reserve set-aside. That requires changing the rules under Wall Street reform so that more financing will be available without the possibility of borrower suits or that irritating 5 percent set-aside. This can be done by gutting Wall Street reform or by changing the definition of a QRM to the point where virtually all mortgages are within the safe harbor, including whatever high-cost financial swill lenders can dream up.

So the next time someone wails and moans about the “new” 20-percent down requirement for mortgages you can safely say there’s good news: Such fears are unjustified because huge numbers of loans with little down are available under Wall Street reform. You might also mention that the real issue is lender profits and the right to make high-risk mortgages.

You know, like the toxic mortgages at the heart of the financial meltdown, lower home values and massive numbers of foreclosures. Loans that for the moment do not meet QRM standards. The very loans that generated vast profits for big banks and brokerages and huge executive bonuses for top corporate leaders. And for you, what did you get?

Why You WON’T Need a 20% Down Payment For a Mortgage Loan is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

Technorati Tags: 20 percent, 20%, 5 percent, 5%, conventional, Dodd-Frank, down, downpayment, FHA, payment, QRM, qualified mortgage, qualified residential mortgage, requirement, reserve, VA, Wall Street Reform

On May 11th HUD said first-time buyers could use their $8,000 tax credit to fund their FHA downpayment. In effect, borrowers would get a short-term bridge loan that would be repaid when the money for the tax credit was received.

But, whoops, it turns out that such secondary loans are banned, taboo and not allowed. As a result HUD took down the May 11th almost immediately.

New Policy

Now HUD is back with a replacement letter that says first-time buyers CAN use their tax credit for an FHA down payment — but only when it comes from a state housing agency or approved nonprofit organization.

However, most FHA loans do not come from state housing agencies or nonprofit groups, they come from private lenders such as banks and savings-and-loan associations. When loans come from these sources it’s possible to get a secondary loan — but NOT for a down payment.

“Current law,” says HUD, “does not permit approved lenders to monetize the tax credit to meet the required 3.5 percent minimum down payment, but, under the terms of today’s announcement, lenders can now monetize the tax credit for use as additional down payment, or for other closing costs, which can help achieve a lower interest rate.”

FHA Loans With No Money Down

For some first-time buyers the new policy can be translated into home purchases with nothing down. Imagine that Smith gets funding from a state housing agency and buys a home for $228,500. The FHA-required down payment is 3.5 percent of the purchase price or $7,998 in this case.

What About All FHA Borrowers?

Why not allow first-time buyers — or all buyers — to get FHA financing with nothing down?

Risk. The FHA program is an insurance plan. Less down equals more risk and the FHA program has traditionally said that borrowers must come up with the down payment from only two sources: savings or a gift.

The down payment requirement makes sense but is not entirely fair. For instance, if my parents are rich and your parents aren’t, guess who can get a down payment gift — and who can’t?

Also, the FHA allows “seller contributions” for as much as 6 percent of the sale price, meaning that if an owner is sufficiently desperate he or she will pay all the buyer’s closing costs and extra dollars that can be used to increase the down payment. The effect of this policy is to lower the buyer’s cash costs at closing, money that can then be used for the down payment.

If you’re a first-time buyer, please speak with local brokers and lenders to see what’s available under the new HUD policy from state housing agencies and nonprofits.

For a look at program specifics, please go to the IRS page, First-Time Homebuyer Credit.

FHA — Yes (Sort Of) To No Money Down is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

Technorati Tags: $8, 000, buyer, credit, down, FHA, first, payment, tax, time

On Monday, May 11th, HUD posted Mortgagee Letter 2009-15 which explained that “Federal, state, and local governmental agencies and nonprofit instrumentalities of government, FHA-approved nonprofits, and FHA-approved mortgagees may provide short-term or “bridge loans– secured only by the anticipated tax credit due the homebuyer as collateral.”

Immediately the letter was removed from the site. However, we have a copy of HUD Mortgagee Letter 2009-15.

It is not clear if HUD has changed its policy or if the letter will be back. As of early May 18th, the letter has not been re-posted on the HUD Mortgagee Letter site.

If the policy is to allow state and non-profit groups to use the $8,000 first-time buyer credit created by the Obama Administration as a downpayment, then such purchasers would be able in many cases to buy a home with nothing down or close to it.

For instance, FHA requires 3.5 percent down. If a home is purchased for $225,000 the downpayment would be $7,875. Closing costs would be extra, but in today’s market it might be possible to get a seller to pay some or all of the closing costs because the FHA allows a 6-percent “seller contribution” from owners. Please speak with lenders and real estate brokers for specifics.

Stay tuned — we’ll follow up as more information becomes available.

Will HUD Allow FHA Loans With No Money Down? is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

Technorati Tags: 15, 2009, down, FHA, HUD, letter, money, mortgagee, no

It’s a political question, of course, and when the time came for the Senate to vote in April the count was 51-to-45 against a measure would give judges the right to change home loan terms and rates. For the moment at least, S.61, the Helping Families Save Their Homes in Bankruptcy Act of 2009, is dead.

Or is it?

In reality the Senate vote was just one battle in a war which is going to last for many months. As Sen. Richard Durbin (D-IL), the bill’s sponsor, told The Washington Post that “I’ll be back. I’m not going to quit on this.”

But opponents, according to Forbes magazine, “argued that allowing judges to unilaterally adjust the terms of mortgages (or “cram down” the mortgages, as the financial services industry says) would create an alarming precedent, undermining existing principles of contract law. Eventually, they said, lenders would have to raise mortgage rates for everyone to cover losses forced on them by bankruptcy judges.”

Really? An alarming precedent? Undermine contract law?

This is nonsense.

The truth is that until the Supreme Court’s Nobleman case of 1993, bankruptcy courts routinely changed rates and terms for home mortgages. Contract law was not undone, there were no alarms and the country did not implode into a lawless mass.

With Nobleman, however, the Supreme Court said that bankruptcy judges could not change the terms of first liens on a residential property. They could, however, change the terms on first liens secured by vacation homes, yachts and private planes.

In other words, there is NO centuries-long precedent which says we can’t go back to what we were doing in 1993 except that the banks and credit card companies would be offended. There’s no reason why the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 cannot be undone — this was legislation which says that before a homeowner can file for bankruptcy he or she must first have six-months of financial counseling. In other words, by the time the borrower meets the counseling standard the home has already been foreclosed.

Do you think the Republican House, the Republican Senate and the Republican President who passed this bill in 2005 did not know this? Do you think they did not know that they were making student loans life-long debts that were virtually impossible to relieve through bankruptcy? Or making credit card debt virtually impossible to modify?

Don’t be fooled. Fixing the bankruptcy system does not involve breaking any sort of precedent. There’s no cause for alarm. There’s merely a need to get fairness and balance back into the legal system.

Bankruptcy Fables Your Lenders Love is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

Technorati Tags: 2005, bankrutpcy, cards, cram, credit, down, loans, mortgage, planes, relief, student, yachts

To understand what’s happening here, you have to go back to 2005 when a Republican House, a Republican Senate and a Republican President agreed that the Nation would be well served if bankruptcy judges were not allowed to reduce mortgage debt on prime residences.

Under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 — a grotesque, misnamed effort designed to effectively assure that no corporation would be denied the right to pay out massive executive bonuses — borrowers facing bankruptcy could not seek a reduction in their mortgage balances unless that had first obtained 180 days of consumer counseling prior to filing for bankruptcy.

Why is this a problem? Because most foreclosures start after three missed mortgage payments — about 90 days. In other words, under the 2005 legislation borrowers would have already lost their homes before they could ever get to a bankruptcy court.

“The practical effect of the current bankruptcy law is that borrowers stuck in unaffordable home loans must cure their defaults and, in addition, make monthly payments on the loans according to their terms or lose their homes. No other creditor in personal bankruptcy or business bankruptcy can leave a borrower in such a position,– says a study produced jointly by the National Consumer Law Center, National Association of Consumer Bankruptcy Attorneys, Consumer Federation of America, National Association of Consumer Advocates and the Center for Responsible Lending.

Alternatively, if you didn’t pay the loan on your second home, plane or yacht then no such counseling requirement exists. These loans can be modified — reduced — by a bankruptcy judge, great news for the well-healed.

The idea that those who lend to homeowners would be subject to the same rules as those who lend to vacation property owners and millionaire yacht captains has greatly offended the mortgage community.
They call such modifications “cram downs” as if there was something hideous or unfair about mortgage lenders being treated the same way as any other creditor.

Indeed, The Mortgage Bankers Association says “we remain opposed to bankruptcy cram down legislation because of the destabilizing effect it will have on an already turbulent mortgage market. We were surprised by the suddenness of the announcement and are still evaluating the proposed deal, but we believe there remain a number of crucial issues that need to be addressed.

“Any agreement needs to protect FHA and VA guarantee programs. Today’s announced agreement does nothing to solve that important issue. In addition we believe that this legislation ought to be limited only to subprime loans. We would also want to see a sunset date that limits how long judges would be granted this extraordinary power.

“This legislation would have a significant effect on the mortgage markets and we believe it ought to be subject to the normal legislative process, including hearings and markup. We look forward to working with our members and Congress to address these and other issues.”

Think through the logic of this statement — why it is okay to modify subprime mortgages — a HUGE concession by the MBA — but not other home loans? Has anyone not noticed that vast numbers of borrowers who are now being foreclosed do not have subprime financing? Instead, these are people with option ARMs, interest-only mortgages and loans made with stated-income loan applications.

The mortgage industry invented “affordability” mortgage products to originate more loans, collect more fees and boost corporate income. There is nothing in the national interest which says industry profits are more important than throwing millions of people on the street, a reality now being reflected on Capitol Hill.

New Mortgage Modification Effort Starts In Washington is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

Technorati Tags: Captiol Hill, Citigroup, cram, cram-down, cramdown, Democrats, down, Republicans

The way you get loans with less down is to find a financially-strong co-signer, someone or something that will bail out the lender if you can’t repay your mortgage. Loans guaranteed by the VA, FHA or private-mortgage insurance (MI) all allow borrowers to buy with little or nothing down.

But — and you knew this was coming — insurance requires an insurance premium, so to buy with little down AND without the cost of insurance, borrowers and lenders during the past few years increasingly turned to piggyback financing or financing with a simultaneous second.

With porker financing you get a first loan for 80 percent of the purchase price and a second loan for 10-, 15- or 20-percent of the home’s value. The result is little or nothing down, plus no cost for mortgage insurance.

Who makes such second loans? Sometimes a second lender, but often the very lender who provided the 80-percent first mortgage and also finances a second loan for the same transaction.

Once-common piggyback deals are now increasingly rare. The reason: That second loan is immensely risky. If a home is foreclosed the odds are overwhelming that the entire value of the second mortgage will be lost. Unlike a first loan, of course, there is neither insurance to offset a loss nor the equity represented by a significant down payment to protect the lender.

The evaporation of piggyback loans is a marketplace “correction” that’s long been overdue. Such financing is cute and clever — but only when home values are rising. Since home values do not always rise, the once-popular piggyback loan is now toast, nicely browned on both sides.

With the virtual disappearance of subprime loans — and with a substantial decline in interest-only mortgages, option ARMs and stated-income loan applications — what we have today is your father’s mortgage marketplace: Take your pick: You can get a conventional loan or a mortgage backed by FHA, VA or private mortgage insurance. Exotic mortgages are out, piggyback loans have been barbecued and dull loans that borrowers can actually understand are back.

Unfortunately, some buyers will not be able to get financing or refinancing under the new standards or they’ll be forced to borrow less. That sounds fairly gruesome until you realize that prudent borrowing means fewer foreclosures and a gradual return to normal markets, things which benefit us all.

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Published originally by Realty Times on July 23, 2008 and posted with permission.

Why Have Piggyback Mortgages Disappeared? is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

Technorati Tags: down, loan, mortgage, no, payment, piggyback, simultaneous second, toxic

Markets are always in flux so there’s no way to determine when absolute bottom has been hit. This means that buyers looking to make a purchase in today’s marketplace need to act with special care. It’s not enough just to get a lower price, buyers must also look for long-term value.

How can you do this? Here are 10 steps to protect your interests as a buyer in a down market.

1. Look at the relationship between prices and inventory. Even if prices have been declining they may have further to go if the inventory of homes on the market is increasing or is far larger than usual.

2. Be aware that recorded sale prices do not tell the whole story during slow times. To figure out what’s really happening you need to know how local transactions are constructed. This means if two homes are each sold for $600,000, the real cost to buyers may actually be different. This is possible because one buyer may have gotten concessions worth $5,000 while a second may have negotiated better and gotten an even bigger discount. The only way to really know about local pricing is to work with a local buyer broker who does a large number of transactions.

3. What are the long-term prospects for the local community? You need to look at such markers as population growth, job base expansion and new home construction. A growing population suggests more demand for housing. A growing job base indicates a larger pool of qualified potential buyers. If home construction is not sufficient to meet marketplace demand then supply is likely to tighten and home prices will be pressured to rise.

4. In previous down markets owners who could not sell simply hung on to their homes until times improved. In today’s market, new forms of toxic financing mean that many sellers no longer have this luxury because they can face rapidly rising monthly mortgage costs. The result is not only higher rates of foreclosure, but foreclosure auctions which are not successful. Lenders then wind-up with a growing inventory of “REOs” — real estate owned. An expanding REO inventory is one sign that the bottom of the market has not been reached.

5. When negotiating with sellers in a down market it’s smart to have a compassionate attitude. A buyer who swaggers and flaunts his position may find that sellers will harden their attitudes, making negotiation more difficult than necessary. A better approach is not to be critical of either the seller or the property, but instead to explain that marketplace conditions limit your ability as a buyer to pay more money. In other words, it’s nothing personal and I respect you and your situation.

6. Before looking at homes, make sure you have reliable financing in place. Down markets are the very times when lenders tighten underwriting standards and pull risky loan products from the marketplace. If your idea is to buy with nothing down and a stated-income loan application, you may find that most lenders no longer have much stomach for such arrangements. Be sure to have a loan officer review your credit standing with care so that you understand how much you can borrow and what programs are available in your situation. Get a pre-approval letter from a lender to show sellers that you have the financial capacity to buy.

7. Don’t buy the first bargain property you find. In a down market there’s typically a huge array of properties from which to choose. Take your time, have a checklist of the features you want most. Time is on your side because each day that passes sellers have additional carrying costs.

8. Think about where the local market is headed. Where is future growth for your community? Maybe it’s along a corridor of newly-developing suburbs or perhaps an inner-city area is being revitalized. Whatever the case one should not forget investing basics merely because you’re buying in a soft marketplace.

9. Be conservative in a down market. It’s true that you may be able to buy a bigger home than in the past, but do you really need a bigger home or a larger mortgage?

10. Be aware that no one knows what the future will bring. As they say on Wall Street, past performance does not guarantee future results. Whether the market is up or down we have no certain way of knowing where prices will be in the future. Because of this uncertainty it makes sense to buy with caution and care, to look not only for low prices but also for properties which have the best chance of lasting value and marketplace desirability. After all, at some point today’s buyer is likely to become tomorrow’s seller.

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Published originally by Realty Times on September 25, 2007 and posted with permission.

10 Ways To Buy Homes In A Down Market is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

Technorati Tags: attitude, buy, down, financing, market, mortgage, profits, real estate, rental, tips

These owners truly believe that somehow their property is unique and different, a home so wonderful that general sales trends are irrelevant

Compared with last August, in my area we have evolved from a strong seller’s market to something which has more balance. Prices are up a touch, but not up insanely. Days on the market have doubled, unit sales are down 20 percent and instead of paying premiums, some buyers are getting “seller contributions” at closing.

How can you spot a marathon seller? Here are some clues:

• The home has been on the market 400 days while local properties typically take 88 days to sell.
• A look at the MLS in August shows a home with snow.
• The property has fewer visitors than a forgotten cemetery.

When the listing expires no broker steps forward to instantly re-list the property.

When finally re-listed, the property has a higher price — even though it could not be sold at a lower value.

Much of what we’re seeing in today’s marketplace has no relation to reality. Immovable prices seem designed more to enhance throbbing egos and party-talk bragging rights rather than produce sale results.

Surely it makes sense for sellers to test the market, to select the highest possible price they realistically think they can get. But marketing tests should not continue eternally. After a reasonable time on the market — the term “reasonable” being different for different markets and different properties — owners should have some sense of what’s real and what isn’t.

Unrealistic prices not only lead to marathon selling periods, they also produce excess costs. There are mortgage and utility payments to be made each month as a home languishes on the market, plus the tax bill grows.

Worse, if a replacement home has been purchased and the first property remains unsold, there may well be two mortgages and two sets of taxes and utilities.

Given that many households can barely tolerate one set of ownership costs, doubling such expenses hardly seems attractive. A house with expenses of $3,000 of month that stays on the markets for months on end means the eventual sale price has been effectively cut by thousands of dollars.

Longer selling times also change broker economics. The old expression is that brokers who are not careful “can list themselves into bankruptcy” by taking on too many homes that do not sell — or do not sell within a reasonable period. Why? Because each property must be advertised and marketed and such things are not cheap.

Owners, having once established in their minds what a property is worth, sometimes see any lower price proposal as a “loss” when that’s not the case.

For instance, imagine a home that will not sell for $750,000 — but it might sell for $700,000. To the owners who dreamed of the first price, this is a $50,000 “loss” even though they never had a sale at $750,000.

In an environment where prices are rapidly rising you see buyers more willing to take a chance because there’s some certainty that replacement buyers can be found if necessary. But slow the market and both the math and philosophy of home buying changes. Buying is more risky because a quick re-sale at a good price is less assured.

Slower markets also change the math and thinking needed to be a successful seller. Alas, some sellers have yet to understand that when the marketplace slows it slows for everyone.

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Published originally by Realty Times on August 29, 2006 and posted with permission.

Marathon Home Sellers Race Reality is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

Technorati Tags: Buyers, down, market, mortgage, perma-listings, real estate, Sellers

There is no end to the news releases and announcements from government officials at every level explaining that they want to see the highest possible levels of home ownership. In 2007, as an example, HUD explained that “homeownership in America is at a historical level – nearly 70 percent of Americans own their home. For individuals and families, homeownership is the key to financial independence and wealth creation. And for our nation as a whole, the housing sector has been vital to the health of the U.S. economy and the stability and vibrancy of our communities.”

But such glowing news should raise a question: Is there a better way to increase ownership levels?

If we agree that Adam Smith was right and that the “invisible hand” of self-interest is a core motivating force, why then do we deny the right of the poor to make a profit when they buy homes with federal assistance?

For example, FHA is considering a ban on seller-assisted home purchases through non-profit groups, the logic being that such arrangements increase local housing prices as well as the potential for foreclosures. (Such a ban was actually passed in the 2008 FHA reform bill.)

The main victim, should such a ruling come to pass, is the Nehemiah program, an effort which has created thousands owner-occupant households.

“Under FHA guidelines,” explains Nehemiah, “it is inappropriate for a seller to contribute money towards a down payment for a buyer to purchase the seller’s property.”

Instead, Nehemiah provides a gift equal to 3 percent of the purchase price to the party that conducts the closing. The result is that qualified buyers get assistance within the rules — rules that FHA now wants to change.

In other words, we have a large pool of buyers who can afford monthly payments but have trouble raising an up-front down-payment. FHA argues that the down payment must come from the buyer’s own funds — even though so-called “seller contributions” of 3 to 9 percent are routinely allowed under various conventional loan programs and 34 percent of all first-time buyers received help from relatives and friends, or an inheritance, according to a 2007 study by the National Association of Realtors.

There are several issues here:

First, Nehemiah, Habitat for Humanity, Rebuilding Together, and like groups are all doing what the government should be doing. The catch is that such groups are succeeding without massive funding, huge bureaucracies, and reams of self-congratulatory press releases — indeed, cynics might argue that if volunteer groups continue with their successes, we won’t need either FHA or HUD or the tax bills they represent….

Second, once people have ownership, foreclosure rates are remarkably low. Given that property values tend to rise over time in most markets and at levels above the rate of inflation, ownership by and of itself is one way for households to create wealth. By denying seller contributions to buyers who can make monthly payments, FHA would effectively exclude many households from the potential for realty profits if it adopts the policy it now proposes.

Third, since when has making a profit when dealing with the government been a sin? Washington has more lobbyists than cherry trees, all looking for favorable deals, rules, and laws so that clients can pocket big dollars. Surely what’s good enough for big business, big labor, and big interests should also be available to the poor.

A number of progressive groups are providing services and opportunities which the government should support, especially given public and repeated pronouncements which laud volunteer efforts. FHA has now raised a policy idea, and the time has come to place it back in the dust-bin where it belongs.

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Published originally by Realty Times on Oct. 12, 1999 and posted with permission.

Should The Poor Make A Profit? is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

Technorati Tags: America, assistance, ban, down, FHA, Habitat, HUD, Humanity, Nehemiah, payment, programs, Rebuilding