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FHA may need a bailout, lending conditions could tighten

As the FHA reserves are depleted with a growing number of mortgages delinquent or in foreclosure, a bailout could spell trouble for the recovery of the housing market.



money bags ctan

money bags

Bailing out the FHA

According to The Wall Street Journal1, 9.6 percent of all of the The Federal Housing Administration’s (FHA’s) $1.08 trillion mortgage guarantees or 90 days past due, or in foreclosure, depleting its reserves to a point that it appears a bailout may soon be requested. Last year, the difference between the FHA’s reserve amount, and the amount it would need if it had to pay all projected losses was only $1.2 billion, or .12 percent of its loan guarantees; the agency is required to keep the amount above 2.0 percent.

Given those numbers, the FHA may have no choice other than to ask the Treasury for money, and a bailout doesn’t bode well for a housing recovery.

So how did it come to this? Some speculate that the agency continued to insure bad loans from 2007 to 2009 while other insurers like Fannie Mae and Freddie Mac were reducing their risk, and The Journal adds that as recently as 2012, FHA was guaranteeing loans requiring only 3.5 percent down.

The FHA could have a negative net worth soon without a bailout, and while they have gotten an infinitely blank check from the Treasury and won’t have to beg for the funds from Congress, the relief would likely be short term, and risk upsetting politicians who will advise the agency adhere to stricter underwriting guidelines, which could make mortgages more difficult to obtain, as a tight lending environment could tighten up even more.

According to the National Association of Realtors’ Chief Economist, Dr. Lawrence Yun, the trade group anticipates a housing recovery unless the nation is pushed off of the “fiscal cliff” or there are “no further limitations on the availability of mortgage credit.”

While the nation continues to see slight improvements in housing, this could be a substantial setback.

1 Wall Street Journal report

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  1. SteveAlbin

    November 16, 2012 at 4:58 am

    Federal Housing Administration has exhausted its reserves and may draw on taxpayer resources. “The recognition that FHA’s economic value is now negative is a stark reminder that we have put off fundamental housing finance reform for too long. FHA has strayed a long way from its original mission, and it’s time for us to return to fundamentals in housing, recognizing that having the federal government making loans to people who can’t pay them back isn’t good for homeowners, communities, or the country,”  NOT CORRECT

  2. Joe Loomer

    November 16, 2012 at 6:33 am

    “…to a point that it appears a bailout may soon be requested”  What’s the point of this post?  Are they requesting a bailout or not?  What indication is there that this is even being contemplated by the FHA?  And WTF, doesn’t the Journal even KNOW what an FHA loan is? : “The Journal adds that as recently as 2012, FHA was guaranteeing loans requiring only 3.5 percent down.”
    Navy Chief, Navy Pride

    • AGBeat

      November 16, 2012 at 10:30 am

      @Joe Loomer The Journal’s implication is that the quality of loans they back due to their underwriting standards are more lax than Fannie/Freddie, thus their reserves are depleted. They will not have a choice but to ask the Treasury for a bailout, and most suspect their underwriting standards will tighten.

  3. gregcook01

    November 16, 2012 at 1:04 pm

    Tara, FHA should adopt the model of VA loans. Over the past 17 quarters VA have been the best performing loans, while increasing their purchase market share by 71%.
    The VA difference? Family has to qualify based not just on ratios but on residual income. In other words, how much money will they have left after all the bill are paid? Including, Fed/state Taxes, social security. utilities and maintenance.
    Did I mention they’re doing it with ZERO DOWN?
    just my IMHO

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Austin tops the list of best places to buy a home

When looking to buy a home, taking the long view is important before making such a huge investment – where are the best places to make that commitment?



Looking at the bigger picture

(REALUOSO.COM) – Let us first express that although we are completely biased about Texas (we’re headquartered here, I personally grew up here), the data is not – Texas is the best. That’s a scientific fact. There’s a running joke in Austin that if there is a list of “best places to [anything],” we’re on it, and the joke causes eye rolls instead of humility (we’re sore winners and sore losers in this town).

That said, dug into the data and determined that the top 12 places to buy a home are currently Texas and North Carolina (and Portland, I guess you’re okay too or whatever).

They examined the nerdiest of numbers from the compound annual growth rate in inflation-adjusted GDP to cost premium, affordability, taxes, job growth, and housing availability.

“Buying a house is a big decision and a big commitment,” the company notes. “Although U.S. home prices have risen in the long term, the last decade has shown that path is sometimes full of twists, turns, dizzying heights and steep, abrupt falls. Today, home prices are stabilizing and increasing in most areas of the U.S.”

Click here to continue reading the list of the 12 best places to buy a home…

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Housing News

Average age of houses on the rise, so is it now better or worse to buy new?

With aging housing in America, are first-time buyers better off buying new or existing homes? The average age of a home is rising, as is the price of new housing, so a shift could be upon us.



aging housing inventory

aging housing inventory

The average home age is higher than ever

(REALUOSO.COM) – In a survey from the Department of Housing and Urban Development American Housing Survey (AHS), the median age of homes in the United States was 35 years old. In Texas, homes are a bit younger with the median age between 19 – 29 years. The northeast has the oldest homes, with the median age between 50 – 61 years. In 1985, the median age of a home was only 23 years.

With more houses around 40 years old, the National Association of Realtors asserts that homeowners will have to undertake remodeling and renovation projects before selling unless the home is sold as-is, in which case the buyer will be responsible to update their new residence. Even homeowners who aren’t selling will need to consider remodeling for structural and aesthetic reasons.

Prices of new homes on the rise

Newer homes cost more than they used to. The price differential between new homes and older homes has increased from 10 percent traditionally to around 37 percent in 2014. This is due to rising construction costs, scarcity of lots, and a low inventory of new homes that doesn’t meet the demand.

Click here to continue reading this story…

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Housing News

Are Realtors the real loser in the fight between Zillow Group and Move, Inc.?

The last year has been one of dramatic and rapid change in the real estate tech sector, but Realtors are vulnerable, and we’re worried.



zillow move

zillow move

Why Realtors are vulnerable to these rapid changes

(REALUOSO.COM) – Corporate warfare demands headlines in every industry, but in the real estate tech sector, a storm has been brewing for years, which in the last year has come to a head. Zillow Group and Move, Inc. (which is owned by News Corp. and operates ListHub,, TopProducer, and other brands) have been competing for a decade now, and the race has appeared to be an aggressive yet polite boxing match. Last year, the gloves came off, and now, they’ve drawn swords and appear to want blood.

Note: We’ll let you decide which company plays which role in the image above.

So how then, does any of this make Realtors the victims of this sword fight? Let’s get everyone up to speed, and then we’ll discuss.

1. Zillow poaches top talent, Move/NAR sues

It all started last year when the gloves came off – Move’s Chief Strategy Officer (who was also’s President), Errol Samuelson jumped ship and joined Zillow on the same day he phoned in his resignation without notice. He left under questionable circumstances, which has led to a lengthy legal battle (wherein Move and NAR have sued Zillow and Samuelson over allegations of breach of contract, breach of fiduciary duty, and misappropriation of trade secrets), with the most recent motion being for contempt, which a judge granted to Move/NAR after the mysterious “Samuelson Memo” surfaced.

Salt was added to the wound when Move awarded Samuelson’s job to Move veteran, Curt Beardsley, who days after Samuelson left, also defected to Zillow. This too led to a lawsuit, with allegations including breach of contract, violation of corporations code, illegal dumping of stocks, and Move has sought restitution. These charges are extremely serious, but demanded slightly less attention than the ongoing lawsuit against Samuelson.

2. Two major media brands emerge

Last fall, the News Corp. acquisition of Move, Inc. was given the green light by the feds, and this month, Zillow finalized their acquisition of Trulia.

…Click here to continue reading this story…

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