FHA Fundings In 2014

FHA fundings will decline again in fiscal 2014 and are projected to continue to drop to their lowest levels since 2004.  HUD forecasted 2014 FHA fundings at $191 Billion.  Actual fundings came in at $134 Billion, down 30% from initial projections.
HUD independent auditors project fundings dropping again in 2015 to $124 Billion and again to $113 Billion in fiscal year 2016.

Why?  FHA’s insurance premiums are at their highest point ever.  The recent increases in FHA insurance can cost a home buyer between $200 and $400 more per month more than ever before.

Concerned industry advocates, including the National Association of Realtors and the Mortgage Bankers Association are appealing to legislators to agree to immediately lower FHA premiums.  They cite tens of thousands of potential homebuyers are being priced out of the housing market.

Congress is reticent to do so, noting that although there has been significant financial improvement at HUD, their statutory required capital ratio of 2% will not be fully met until late 2016.

So, we now find FHA loans being adversely selected by borrowers who don’t quality for high ratio, lower cost Fannie and Freddie loan programs, which carry more stringent credit requirements than does FHA.

What effect do you think this phenomena will have on the FHA insurance fund going forward?  Adverse selection is never good and is usually the precursor of a negative experience.

On HUD Being Vilified

I just read an article the other day, which vilified the mortgage industry because the Fed had to invest $1.7b in HUD to maintain its’ reserves (said investment will be fully repaid to the Fed by HUD by November). This Fed loan was typified in the article as a terrible thing. My concern is with the tone and presumption of negativity with which these articles are regularly written.  I wonder why an investment in housing the citizens of the U.S. is so demonized?  What is so bad about the government, from time to time, making a temporary investment in housing its citizens?  Why must HUD be vilified for needing this temporary help?  What else in government pays its’ way, like housing? Why is the spending of a hundred million here or a hundred million there on remodeling government office buildings (CFPB headquarters), or a billion on a new airplane or cruiser or new regulatory agency (CFBP) not put under the same microscope?

Here HUD functions for 80 years, quite well I might add, stimulating the housing and real estate industry, and along with it the economy by making home ownership a reality for millions of Americans and once, during the 80 years, the Fed is asked for temporary funds to help HUD get past a rough spot and Congress and the President scream, at the top of their lungs, that the American people must be protected from any future malfeasance by HUD and the mortgage industry.

This just doesn’t make any sense.  How about Congress protecting us from ongoing Wall Street corruption, from the perennial billions spent on social engineering around the world, from the ongoing billions spent on getting us into unnecessary wars, from the billions lost to the devaluation of our currency, from the inequity of taxation, the ridiculous IRS system, the intrusion into our private lives under the guise of protecting us etc., etc.  The mortgage industry has contributed, for more than 80 years, to the housing of America.  Congress and the President need to stop this irrational, negative posturing and let us get back to our business.  There’s a reason why fewer Americans are buying homes than ever before and it’s not the mortgage industry.