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FHA Defaults Surpass 9% – Impending Doom or Just Predictable?

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A historic era

washington moneyThis year has already proven to be a news filled year for the Federal Housing Authority (FHA) as the real estate sector continues to struggle in light of a failing economy. To do their part to inject the real estate industry with life, the FHA has recently relaxed the anti-flipping rules but some argue that recent FHA measures are self interested as they also have taken measures like raising mortgage insurance premiums to fill their drying coffers. Meanwhile, numerous lenders are being stripped of their ability to be FHA backed, yet another sign of massive changes in the lending and real estate world.

Today, news of the FHA loan default rates surpassing 9% has even the Washington Post claims that the December 2009 default rate rise (up 6.8% from December 2008) “foreshadows a crush of foreclosures.”

In November of 2009, we reported that the historic mortgage default rate was at 9.64% and that 3.12% of all homes were in the foreclosure process (putting 12.76% of all homeowners in hot water at the time). This is important to note due to the FHA default rate rising to match that of the national rate. Does this in fact spell trouble for the industry? Does this imply a future accumulation of shadow inventories or foreclosures? Or is this simply a case of the FHA backed loans becoming more average?

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15 Comments

15 Comments

  1. Joe Loomer

    February 10, 2010 at 6:36 am

    It seems to me the modifications to the FHA product (higher MIP, lower Seller contributions, higher d/p for lower FICO) is a clear indication that HUD not only knew there was an FHA foreclosure increase coming, but they also had to do the typical government correction of closing the door after the horse has bolted.

    We as a general public spend a lot of time looking at the government as some gargantuan ship lumbering along with nothing but idiots at the helm. What I beleive the truth to be (from experience) is many of the agencies within the U.S. Government are run by competent (if slow to act) careerists who will not make a decision without all the data.

    It certainly explains the timing of making it harder to get an FHA loan right after you extend the one government incentive (tax credit) that has actually increased sales.

    Navy Chief, Navy Pride

  2. topsy_top20k_en

    February 10, 2010 at 10:15 am

    AgentGenius: FHA Defaults Surpass 9% – Impending Doom or Just Predictable? https://bit.ly/aK7yic Full https://bit.ly/dpnyLn

  3. BawldGuy

    February 10, 2010 at 10:20 am

    Lani — The numbers in the last paragraph got me to wondering. 3.12% of ‘all’ homes were in the foreclosure process. (putting 12.76% of all homeowners in hot water at the time).

    I realize these aren’t your numbers, that you’ve pulled them from reliable sources. However, since, depending upon the source, anywhere from 20-33% of the nation’s homes are free & clear (sans any debt whatsoever), are those homeowners included in the ‘all’ when percentages are computed?

    • Lani Rosales

      February 10, 2010 at 10:24 am

      No, but that’s a truly great point. Given that piece of the puzzle (you and I talk on the phone about the big picture from time to time, so you and I both know personally our affinity for knowing all parts to the puzzle), it’s really:

      3.12% of all MORTGAGES were in the foreclosure process. (putting 12.76% of all BORROWERS in hot water at the time).

  4. BawldGuy

    February 10, 2010 at 10:27 am

    Much prefer that answer. The alternative would’ve meant that both percentages would’ve been significantly scarier. Thanks

  5. Greg Cook

    February 10, 2010 at 12:09 pm

    Lani, my vote is predictable. FHA loans have become a bigger part of the market since this thing started to implode in 2007. Here in California most lenders and Realtors didn’t know how to spell F-H-A before then.
    Historically FHA loans have been the loan of choice for first time home buyers and as result when the economy turns sour, they tend to be the first affected with layoffs and downsizing.
    The unemployment rate is pushing 15% in SoCal and the underemployment rate is estimated closer to 25%. When people start going back to work, the delinquency rate will go down.

  6. Collier Swecker

    February 10, 2010 at 1:30 pm

    FHA Defaults Surpass 9% – Impending Doom or Just Predictable? https://tinyurl.com/ydnq8oq

  7. Realty Infusion

    February 10, 2010 at 8:52 pm

    VERY informative conversation on FHA rates and changes on @AgentGenius https://bit.ly/9i2Ae8 (always quality)

  8. Michael

    February 10, 2010 at 9:11 pm

    RT @RealtyInfusion: VERY informative conversation on FHA rates and changes on @AgentGenius https://bit.ly/9i2Ae8 (always quality)

  9. Richard M. Johnston

    February 11, 2010 at 7:49 am

    FHA Defaults Surpass 9% – Impending Doom or Just Predictable? https://goo.gl/6TXy

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Economic News

Boomers retirement may be the true reason behind the labor shortage

(ECONOMY) Millennials and Gen Z were quick to be blamed for the labor shortage, citing lazy work ethic- the cause could actually be Boomers retirement.

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Older man pictured in cafe with laptop nearby representing boomers retirement.

In July, we reported on the Great Resignation. With record numbers of resignations, there’s a huge labor shortage in the United States. Although there were many speculations about the reasons why, from “lazy” millennials to the number of deaths from Covid. Just recently, CNN reported that in November another 3.6 million Americans left the labor force. It’s been suggested that the younger generations don’t want to work but retiring Boomers might be the bigger culprit.

Why Boomers are leaving the labor force

CNN Business reports that 90% of the Americans who left the workplace were over 55 years old. It’s now being suggested that many of the people who have left the labor force since the beginning of the pandemic were older Americans, not Millennials or Gen Z, as we originally thought. Here are the reasons why:

  • Boomers are more concerned about catching COVID-19 than their younger counterparts, so they aren’t returning to work. Boomers are less willing to risk their health.
  • The robust real estate market has benefitted Boomers, who have more equity in their homes. Boomers have more options on the table than just returning to work.
  • Employers aren’t creating or posting jobs that lure people out of retirement or those near retirement age.

As Boomers retire, how does this impact the overall labor economy?

According to CNN Business, there are signs that the labor shortage is abating. Employers are starting to see record number of applicants to most posted jobs. FedEx, for example, just got 111,000 applications in one week, the highest it has ever recorded. The U.S. Bureau of Labor Statistics projects that the pandemic-induced increase in retirement is only temporary. People who retired due to the risk of the pandemic will return to work as new strategies emerge to reduce the risk to their health. With new varients popping up, we will have to keep an eye on how the trend ultimately plays out.

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Economic News

Is the real estate industry endorsing Carson’s nomination to HUD?

(BUSINESS NEWS) Ben Carson’s initial appointment to HUD was controversial given his lack of experience in housing, but what is the pulse now?

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NAR strongly backs Dr. Carson’s nomination

When President-Elect Donald Trump put forth Dr. Ben Carson’s name as the nominee for Secretary of Housing and Urban Development, NAR President William E. Brown said, “While we’ve made great strides in recent years, far more can be done to put the dream of homeownership in reach for more Americans.”

At the time of nomination, the National Association of Realtors (the largest trade organization in the nation) offered a positive tone regarding Dr. Carson and said the industry looks forward to working with him. But does that hold true today?

The confirmation hearings yesterday were far less controversial than one would expect, especially in light of how many initially reacted to his nomination. Given his lack of experience in housing, questions seemed to often center around protecting the LGBT community and veterans, both of which he pledged to support.

In fact, Dr. Carson said the Fair Housing Act is “one of the best pieces of legislation we’ve ever had in this country,” promising to issue a “world-class plan” for housing upon his confirmation…

>>>>>Click to continue reading…<<<<<

#CarsonHUD

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Economic News

Job openings hit 14-year high, signaling economic improvement

The volume of job openings is improving, but not across all industries. The overall economy is improving, but not evenly across all career paths.

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young executives

job openings

Job openings hit a high point

To understand the overall business climate, the U.S. Labor Department studies employment, today releasing data specific to job vacancies. According to the department’s Job Openings and Labor Turnover Survey (JOLT) for April, job openings rose to 5.38 million, the highest seen since December 2000, and a significant jump from March’s 5.11 million vacancies. Although a lagging indicator, it shows strength in the labor market.

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The Labor Department reports that the number of hires in April fell to 5 million, which indicates a weak point in the strong report, and although the volume remains near recent highs, this indicates a talent gap and highlights the number of people who have left the labor market and given up on looking for a job.

Good news, bad news, depending on your profession

That said, another recent Department report notes that employers added 221,000 jobs in April and 280,000 in May, but the additions are not evenly spread across industries. Construction jobs rose in April, but dipped in professional and business services, hospitality, trade, and transportation utilities. In other words, white collar jobs are down, blue collar jobs are up, which is good or bad news depending on your profession.

Additionally, the volume of people quitting their jobs was 2.7 million in April compared to the seven-year high of 2.8 million in March. Economists follow this number as a metric for gauging employee confidence in finding their next job.

What’s next

If you’re in the market for a job, there are an increasing number of openings, so your chance of getting hired is improving, but there is a caveat – not all industries are enjoying improvement.

If you’re hiring talent, you’ll still get endless resumes, but there appears to be a growing talent gap for non-labor jobs, so you’re not alone in struggling to find the right candidate.

Economists suspect the jobs market will continue to improve as a whole, but this data does not pertain to every industry.

#JobOpenings

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