SAN DIEGO – Nov. 16, 2009 – Federal Housing Administration Commissioner David Stevens said Saturday that concerns the agency is headed for the same financial trouble that snared Fannie Mae, Freddie Mac and the subprime sector are unwarranted.
Stevens made the remarks during a speech at the National Association of Realtors®’ annual conference and expo in San Diego.
His comments come days after the agency revealed its financial reserves have fallen to a dangerously low level due to more homeowners defaulting on their loans. The FHA does not make loans, but rather offers insurance against default.
That’s led to mounting concerns that it will eventually need an infusion of cash like government-controlled mortgage finance companies Freddie Mac and Fannie Mae.
But Stevens sought to dampen those concerns, noting that despite the most severe housing recession in decades, the agency has $31 billion in capital – $3.5 billion more than it had a year ago.
FHA is “the only participant in home financing services in the U.S. economy that hasn’t needed a bailout, hasn’t needed (funds from the government’s Troubled Asset Relief Program), hasn’t needed special assistance and is still completely self-sustaining,” Stevens said.
“Without FHA there would be no (housing) market, and this economy’s recovery would be significantly slower,” he said.
The FHA has insured nearly a quarter of all new loans made this year, and about 80 percent of that business is from first-time homebuyers.
The agency’s dominant role in first-time home purchases has raised questions about whether it taking on too much risk. Some have drawn comparisons between FHA and the subprime market, which collapsed due to homebuyer defaults on risky loans.
Stevens rejected such comparisons, stressing that the agency has far more stringent guidelines for the loans it insures.
“Nothing could be further from the truth,” he said.
FHA’s losses have increased with the unemployment rate as more homeowners default on their loans. About 17 percent of FHA borrowers are at least one payment behind or in foreclosure, compared with 13 percent for all loans, according to the Mortgage Bankers Association.
An independent audit shows FHA’s reserves have fallen to $3.6 billion, compared with $685 billion in outstanding insured loans for the fiscal year ended Sept. 30. That’s a ratio of 0.53 percent and far below the 2 percent threshold required by Congress.
Stevens credited the requirement with keeping FHA on good financial footing.
“That is why we’re still standing while many of others did not survive this tumultuous time,” he said.
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WASHINGTON – Nov. 6, 2009 – Rates for 30-year home loans dipped below 5 percent this week after rising for three straight weeks.
The average rate fell to 4.98 percent from 5.03 percent a week earlier, mortgage company Freddie Mac said Thursday.
Rates had hovered below 5 percent for nearly a month until inching upward two weeks ago. They hit a record low of 4.78 percent in the spring, but are still attractive for people looking to buy a home or refinance.
The Federal Reserve has pumped $1.25 trillion into mortgage-backed securities in an effort to lower rates on mortgages and loosen credit. Rates on 30-year mortgages traditionally track yields on long-term government debt.
That, plus a federal tax credit of up to $8,000 for first-time homebuyers, has helped boost the ailing housing market.
The number of signed contracts to buy previously occupied homes rose for the eighth month in a row in September, while residential construction spending jumped by 3.9 percent, the largest gain in more than six years, data this week showed.
Still, lenders are cautious and standards remain tight, so the best rates are available only to borrowers with solid credit and a 20 percent downpayment.
Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders around the country. Rates often fluctuate significantly, even within a given day, frequently in line with long-term Treasury bonds.
The average rate on a 15-year fixed-rate mortgage declined to 4.40 percent from 4.46 percent recorded last week, according to Freddie Mac.
Rates on five-year, adjustable-rate mortgages averaged 4.35 percent, down from last week’s 4.42 percent. Rates on one-year, adjustable-rate mortgages decreased to 4.47 percent from 4.57 percent.
The rates do not include add-on fees known as points. The nationwide fee for loans in Freddie Mac’s survey averaged 0.7 points for 30-year loans. The fee averaged 0.6 points for 15-year, five-year and one-year loans.
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October 26, 2009—In order to create hundreds of thousands of badly needed jobs and move the economy to higher ground, the National Association of Home Builders (NAHB) called on Congress to extend and expand the $8,000 first-time home buyer tax credit set to expire at the end of next month.
Testifying before the Senate Banking Committee, NAHB Chief Economist David Crowe warned that builders are reporting that business generated by entry-level buyers is already declining because it is now too late to complete a new home sale in time to take advantage of the tax credit.
“Not only will builders soon be losing one of their most effective selling tools when the $8,000 federal housing tax credit expires on Nov. 30, they are also facing significant challenges that threaten to derail the fragile housing recovery before it even has time to take root,” said Crowe. “Strict mortgage underwriting and low appraisals are making it difficult for a willing buyer to complete the sale and terms and credit availability for builder acquisition, development and construction (AD&C) loans are extremely tight. The bottom line is that housing and the economy are at a critical crossroads.”
To spur job growth, help reduce foreclosures and excess housing inventories and stabilize home values, NAHB is calling on Congress to extend the home buyer tax credit for an additional year through Nov. 30, 2010 and make it available to all purchasers of a principal residence. “We estimate this would increase home purchases by 383,000 and create nearly 350,000 jobs in the coming year,” said Crowe, adding that it would also generate $16.1 billion in wages and salaries; $12.1 billion in business income and tax income of $11.6 billion for federal, state and local governments.
Congress can also help put the housing market back to work by encouraging regulators and the banking industry to restore lending for viable home building projects and to take meaningful steps to avoid unnecessary foreclosures on outstanding AD&C loans by accommodating loan modifications and workouts.
“This would provide relief for a major sector of the economy that has suffered because of regulatory excess and the inability of banks to provide the necessary funding and flexibility that would otherwise keep loans performing as scheduled,” said Crowe.
To further contribute to a housing and economic recovery, Crowe urged Congress to call on the Federal Housing Administration, Fannie Mae and Freddie Mac to adopt new regulatory guidelines for conducting appraisals under distressed market conditions.
Citing a recent survey by NAHB that found that 25% of builders are losing sales because their appraisals are coming in below the contract price, Crowe said: “You just cannot compare a well-constructed new home with a foreclosed home that has been vacant for months and was probably neglected for a long time before it was vacated. They simply are not comparable and the standards need to be adjusted to reflect that reality.”
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The General Accountability Office has reportedly frozen more than 110,000 first-time home buyer tax credit refunds pending civil or criminal examinations due to allegations of fraud. The main concerns are whether or not a home purchase actually took place and if the home buyer claiming the credit is technically a first-time home buyer as defined by the IRS.
In another article about the possible first-time home buyer tax credit fraud, reporter Dawn Kopecki reports that children as young as four years old have improperly received the first-time home buyer tax credit. And, according to the Treasury’s J. Russel George, who testified before Congress recently: “They [IRS] also found that 580 taxpayers under 18 years old and therefore ineligible to buy a home claimed almost $4 million in tax credits.”
The first-time home buyer tax credit ends Nov. 30, 2009. If you do not have a property under contract by the end of October 2009 it will almost be impossible to complete the sale unless you are paying cash!
WASHINGTON – Aug. 7, 2009 – The federal government is launching a program to simplify and speed up the short-sale process (about time) by providing standardized documentation, cash incentives to lenders, and a $1,500 moving allowance to borrowers. Holders of second liens will get up to $1,000 to relinquish their claims.
Banks say the short-sale process has been taking so long because both their employees and real estate practitioners are learning as they go. (you would think that after 2 full years of learning the banks would know what they are doing!!! I’ve have been working short sales for 2 years, it only took me 1 deal to know what needed to be done)
David Sunlin, vice president in charge of short sales at Bank of America, says he hopes the new government plan will help. “About half of short sales never close. We see it as a big lost opportunity, and we need to improve the rate we close them,” he says. (This is great, I wonder when BofA is going to put more staff on the job to improve this process, I was on hold at BofA for 40 minutes today and had to listen to “Press 5 to leave a message for a return call in 5 business days” In the end I gave up and sent a fax, who knows if I’ll hear back from them)
Wells Fargo says it has cut its short sale average turnaround time from 90 days to 30 days by preparing a guide from real estate practitioners and putting in place procedures to handle short-sale requests.
The federal government first announced its short sales initiative in May at the annual Washington meetings of the National Association of Realtors®.
There is a pilot program that has been running in Orlando for the past 3 months, they have been able to shorten the short sale process to 7 days! I don’t know why this program can’t be implemented by all banks. My only guess is waiting until it gets so bad that the Fed have to step in and pay the banks to fix the issue. Boy wouldn’t you like to own a bank…
I know with the 20+ short sale deals I’ve done in the past 2 years I could have generated more cash for the bank if they would have been able to approve the sale within 30-45 days. But because of the 3-5 months of waiting the buyers walked and we had to lower the price to find another buyer…
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