FHA is still lending money to people that can't afford it
Government Still Being Stupid...
The Story Of 21 Year Old With The Underwater FHA Loan Is Even Worse Than You Think.
A few days ago we told the story of Denise Tejada, the 21 year old California woman who bought a house with an FHA backed loan with almost no money down.
Readers were outraged.
And rightfully so. It's our money on the line and it is simply outrageous that our government
More..is still encouraging these kind of loans to be made. Even if Tejada pays off her loan in full, it was an insane gamble on our behalf to have the government back her loan.
But as it turns out, the gamble was even more insane that we originally reported.
Scott Jagow, who writes the Scratch Pad blog for American Public Radio's Market Place, explains:
Denise got an FHA loan to buy her home for $155,000. She took out a second loan (called a 203-K loan) to refurbish the place. The total loan amount is about $183,000. She says, “In total, I gave the bank $5,087 + $1,500 which were all deposit and closing costs.”
So her “down payment” was no more than 4% of the value of the home when she bought it. She will get all of that back and then some with the first-time home buyer tax credit.
In other words, thanks to the various government tax breaks, Denise put absolutely no money down on her home. If she has to default on her mortgage, she'll lose nothing except her credit rating. Of course, since she's only 21 years old, there's plenty of time to recover from that.
How is the FHA still engaged in promoting this kind of lending? Barney Frank has explained that expanding home ownership is the policy of the United States. Now, more than ever, the government wants to promote home buying to prop up the great American home ownership scheme. If people like Tejada can't buy a home with no money down, then the recession wins.
Don't you feel awesome for helping Tejada achieve the American dream? Less..
Added: Oct 29 2009 In: news_politics
Recorded on: Oct 21 2009
By: freedomplow 
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- Comments: 4
Comments - sort by newest to oldest
If she can pay it whats the big deal? Tons of people who were much older were unable to pay. We have empty foreclosed homes, not like it's going to hurt more than it already did.
If she has a good record and good credit, why not?
Posted Oct-29-2009 by "ockie" (R)
After all we have been through and they are simply making the problem worse..
When the levee breaks, well have no place to stay..
Posted Oct-29-2009 by "Maxisminion" (R)
The fact of the matter is banks stand to make more on a foreclosed homes vs. remortgaging or new mortgages. Nothing has changed. That's what they are "banking" on. (no pun intended)
Posted Oct-29-2009 by "knowyourlimit" (R)
who cares we can just bail them out again its only paper
Posted Oct-30-2009 by "dannytheahole" (R)