FHA Toughens Down Payment Rules
F.H.A. will raise the minimum down payment for borrowers with a 580 or lower score, the agency announced Tuesday. Those borrowers will be required to put down at least 10%. Borrowers with a credit score of more than 580 will be able to still put down 3.5 percent, which is the minimum guideline currently.
FHA also will increase the mortgage insurance premium from 1.75 percent to 2.25 percent, which is the upfront cost for obtaining mortgage insurance. The premium amount that FHA will seek from the congressional government has yet to be announced.
For more information on the FHA changes, inlcuding a summary of all changes,
The National Association of Realtors’ V.P. Ron Phipps stated one of the most important ways for consumers to see a bright future in terms of the economy is for Congress to extend the $8000 home-buyers tax credit. The tax credit has already made an impact as home sales have increased an estimated 5.1 million for the year. Housing inventory has slowed down helping to stabilize house prices. Since the momentum takes awhile, there’s not a better time to build on that by the extension of the tax credit through next year.
The present tax credit is set to expire on November 30th. Those who are in contract now may not be able to take advantage of the credit and close by that time. A few other things that Philips is pushing for is to make the FHA, Fannie Mae and Freddie Mac limits permanent that were established for this year, keep the governments continued involvement in the secondary mortgage market, discuss the Home Valuation Code of Conduct’s side effects that are slowing down sales, and give incentives and uniform procedures for short-sales.
This past Tuesday The Treasury Department stated only 9 percent of eligible home owners received assistance from the Government on mortgage loan modifications and foreclosure prevention.
Two of the biggest bank giants not willing to help borrowers were Bank of America and Wells Fargo, which received federal bailout money. Bank of American modified 4 percent of eligible loans, while Wells Fargo only modified 6 percent.
Out of the larger banks that did assist with modifications were JPMorgan Chase & Co., which modified 20 percent, and Citigroup Inc. which modified 15 percent of eligible loans.
I recently answered a question about what happens when a bank is taken over by the government. This got me thinking a little bit more about the pros and cons to having that happen. Would it be a good or bad or make any difference at this point?
To sum it up bank nationalization means a bank is owned and ran by the government. This has happened in our country’s history before and we came out ok. Case in point being the S&L debacle a few decades ago. The government took over and slowly sold off the banks’ assets and then eventually there was recovery. This also happened in Sweden and France, but France may be restarting the process. Below are my thoughts about the good and the bad regarding nationalization.
The good:
- More loans being made to consumers. More flexible guidelines would exist and more borrowers would qualify….
- Current deposits remain insured thru FDIC. Since FDIC can borrow money straight from the US Treasury, they would never run out of money.
- Equity holders would be wiped out..
- Possible guarantee of all deposits at US Banks…not just the one’s who are in trouble.This would raise levels confidence with consumers where they have their money, and shareholders as well..
- Foreclosure slow down…thereby banks won’t loose as much money and home values should normalize..
The bad:
- Customer service quality impacted. There would most likely be a decrease in quality service as banks become more conservative and lose employees…
- Closure of more branches
- Loans made to meet social objectives, quantity not quality. Banks may have a more political agenda…
- US Taxpayers taking on more expense/debt
Would nationalization solve the problem of bank failures? Or will this increase the crisis?
Will smaller banks be able to compete? Should the government discontinue anymore bailout programs and let the foreclosures run its course? It’s hard to say, anyway you look at it’s still going to be a challenging road….
