BofA FHA insured delinquent loans increase nearly 200 percent in one year.

Last week HUD came out with laser focused ways of addressing its impending insolvency because of defaulting FHA insured loans. Now some of you were under the impression that something was already done to tighten lending standards given the precarious situation the housing bubble brought to our economy. Yet that is not the case and incredibly, what passes for basic due diligence today seems excessive because only a few years ago loans were given out to people making $14,000 a year and financing their $720,000 home purchase. FHA insured loans have become the staple of moving properties especially in areas like California. The 3.5 percent minimum down payment is all people can muster up and apparently this has caused further deterioration in this market.

HUD is seeking public comments for the next 30 days on the below:




Source: HUD



Now some of you might be thinking why we are asking these basic questions three years deep into the housing implosion. The first question focuses on the credit score of borrowers. Can you believe that a 580 credit score will enter you into the “flagship” 3.5 percent down payment FHA insured loan program? No wonder why defaults are off the charts. No bank in their right mind would lend their own money so banks are basically using the government as their lender and sucker of last resort to continue to make these financially troubling loans. The second point relates to seller concessions. Yes, this stuff is still going on. Serious reform apparently doesn’t involve basic common sense. Finally, the third point focuses on tighter underwriting. If we are asking these questions today from an agency that now insures approximately 4 out of every 10 loans we have some major issues coming down the pipeline.