Quote:
Originally Posted by JasonCSU
This is interesting and a little confusing. The posting states that the bailout is to cover projected loses due to a reverse mortgage program for seniors, not because of small down payment percentages and people defaulting on their loans. First off, why does a reverse mortgage program even exist? Second, isn't the whole point of a reverse mortgage for the FHA or bank to become the owner of a property once the senior receiving the reverse mortgage moves out or passes on? Have the banks been over paying on the reverse mortgages for more than these properties are worth, and have they not taken ownership of any of them yet? In theory, banks should be making money in the long term with reverse mortgages.
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Yes, reverse mortgages should always be profitable, they have been for decades in Asia, and Europe, but not the U.S? It doesn't make sense from a logical standpoint, unless of course it's a lie and that's not the reason why FHA is failing.
That's simply the FHA's "feel sorry for us" reason for it's failure so the treasury will give them the $2 billion dollars in bailout money. "We're trying to help senior citizens!" is a lot more palatable than "We gave money to people with sub-600 FICO scores, becoming the NEW sub-prime, and f*cked ourselves. Now we need tax payer money."
The FHA had delinquency rate increases of 10%, 27%, in 2010, 2011, respectively. Anyone who didn't see this coming literally had blinders on. They knew they were properly f*cked at the end of last year because they suddenly shot fees up all across the board for consumers looking for an FHA backed loan:
http://www.businessweek.com/news/201...h-2012-deficit
They also KNEW they had a nearly $20 billion dollar shortfall last year and would have no chance to cover their losses.
But as I predicted, FHA is going to hurt all of us in the end, because guys like 48Laws, and other FHA opportunist thought 3.5% down on anything is a great idea.