I agree, we are in for a ride.  We will make it through, we always do.  Will it be easy, probably not.  I agree that there should be some DPA programs out there.  It is kind of like a diet we are on.  You should never eliminate one entire food group.  The DPA is definitely a good fit for many purchasers.  However, I do think that there should be some sort of reserves because unlike renting, you the home owner are now responsible for the maintenance and upkeep and that can be costly.

J...glad you're back.  I know that the DPAs need to be credit approved by a DE on or before 10/1.  I still have a rush to get certain people in, but I, for one, think that it's probably beneficial to see the government push DPAs to the side.  Just yesterday a bill was introduced in the House to ressurect them...only time will tell.

Jeff:  Thanks for your analysis on the current state of things Mortgage-wise. I would love to see a post, or series of posts, written from our veteran Mortgage members giving consumers timely strategies on how to cope with the current market. How can people best prepare for what's ahead? How can young couples effectively plan and budget now for a home purchase in the future?

There is a need for the DPA's for sure, It is hard to save enough for a down payment sometimes, that shouldn't keep people out of the housing market if they have good credit and earn enough to pay the mortgage. I am tired of the government bailing out the big boys who's CEO's make millions and not help the average American family.

Jeff... I think Rich has made a great suggestion. A series of posts on how consumers can cope with the market would be excellent.

I agree with your assessment that the non-profits didn't cause the foreclosures.  Our market has gone from frenzied prior to this legislation passing to what I would call discombobulated.  I am going to be posting on this a lil later :)

Jeff:  My market was local just 2-3 months ago... I'm afraid that all markets, including mine, are becoming national.  Trickle down economics, I guess.

AUDREY...... well, I am nearing the start of my 17th year in the mortgage industry. I agree, many of us will get through this. But, this time around, at what cost?  Especially when there are fewer programs now, than there was back in 1996.  Meaning, many of the same programs out now, are tougher to get, even the conventional loans.

I agree about the DPA's and adding reserves. I added this, after your comment. And this was talked about in the conference call yesterday, from the President of Nehemiah. ,.... one of the agencies for DPA's.  I think they should add a little to them, but not to much.  But in all honesty, by stopping one thing, could allow for more fraud in this industry also.

LARRY.....  thanks.. I was just burnt out and on vacation, besides being busy at times.  In regards to the DPA loans needing to be credit approved by 10/1. Are you sure that is not your company saying this?  HUD still hasn't sent out their mortgagee letter yet, but from what I know of it and what was mentioned in the Nehemiah conference call yesterday.. was that you had to have a FHA case number registered by 10/1.  We should look into it... as I mentioned, some companies add their own requirements. We have one investor that will no longer take DPA loans now.

RICH.... my pleasure and thanks for stopping by.  I agree, a good series would be good.... but that is a lot of work. As I told someone a few minutes ago, I could write more blogs like this one, that was featured... because these get more attention on here... but I would rather write boring educational posts about FHA, because that is where I will get more business from. It's just a marketing standpoint. Sure, will the series that you suggest get more feedback on here and still add value?  yes...  but one thing that scares me... it's very easy to add more opinion than fact and in many cases, make your opinion sound like a fact, unless noted.  Again, something to think about.. thanks

MICHAEL....  I agree with your last statement.... and this is the problem that we are facing.  Fix some problems due to greed, that some people made money off of, and now change things so the average homebuyer has a more difficult time. Hey, if someone qualifies by standards, why not get help from the equity of their home, if it's truly there....

JEFF T......  as mentioned to Rich... I agree,this could be good. And I think I could write some good ones... which would allow for more features, as some loan officers write on here... but I am about getting the attention of the consumer and certain special key words, that has made me money, because of how people found me. The average consumer doesn't really want an explanation such as this, but someone that will just be upfront with them, get them the loan, and to communicate to them.  I am hearing this more and more from consumers now.

On another note... great to see you again... thanks for stopping by.

Jeff,

I have missed this kind of post from you. There are problems, but we can, working together find some solutions. National, local, regional, all in all, the Real Estate market will end up driving the economy and vis versa. With a sluggish economy, you get sluggish Real Estate. With sluggish Real Estate, you get sluggish economy. Politicians are not the answer.

Jeff, I totally agree with several points you made in this post. Government should have stayed out of the mortgage mess and let the market take its course. The new guidelines are set by those who paid put these government members in the office. Also, you made a great point about people being more careful than ever. I have received so many emails since the new guidelines were released about what a great opportunity this or that factor of the new bill is for the home buyers or home sellers!!!!!

RENEE.... it's just funny and sad to hear HUD and how they keep spitting out the figure that 1 out of every 3 DPA loan goes into foreclosure. But nobody breaks down these numbers...  why?  Loss of job?  Did the lender commit fraud? Was the loan approved with such a high debt ratio?  This is what ticks me off about stats and not telling people that the economy in itself could be the culprit.  And I will stick to this statement, there needs to be a better study done then, why more DPA's into foreclosure and stop blaming what might seem the obvious, that the borrower is putting no money down.  Looking forward to your post on this...

JAN....  we will always have local markets... good or bad. And many that will reflect the national market as a whole. But we need more detailed figures and explanations, if they are going to take certain programs away.

FRED....  thanks for that kind compliment. But working together?  Yes and no... who needs to do what then?  If we have the same programs, who is working together?  How about the gov't not make major changes to something that has been working for the most part.  As I mentioned to Jan, how about more detailed figures to as why... and not just pulling the carpet out per se, just because.

MANA......  what I want most people to understand is that the investors and lenders control the market.  Someone as HUD/FHA, they set the basic guidelines. Many companies have made it harder. Then you have the loan officer that makes it sound like everyone does this, which is not true. Or for the fact that the loan officer is misleading or doesn't give a good explanation.

Jeff, hang in there.  Great post.  You are a great blogger and while I don't agree all the time  I am greatful for the information you make available to all of us.  Just wanted to thank you!

It is my humble opinion that the things you point out are contributing to what is going on in the market.  I think only a very few inidividuals are actually the " cuase" of the foreclosure/shortsale mess!  The politicians seem to miss the boat and don't have a clue.  Too bad they are not reading some of the post from professionals such as yourself and other on Active Rain! 

Hi Jeff~ a wonderful posts that not only gets to the meat of many of the mortgage issues, but the real world realities so many consumers face. It is a scary time, but really helps is when the professionals with experience and integrity like you, can help make a difference in helping consumers figure it all out. I second Rich's and Jeff's motion of a series:)

Jeff - who ever said life is boring or that this business is the easy way to make a buck certainly had never experienced the market of today.  I agree times are a changing - but with every change we can at least work with what is out there.  Call me stupid - but I would rather see the change happen than have everyone wondering and trying to figure out the truth... having you in our network is certainly a help - it allows us to focus on the buyer and give you the issue of the program and what they can and can't do... thanks for hanging in there and keeping us up to date.

Jeff, I think you know I agree with you on this point.  I just wish the politicians would listen with reason.

Jeff--- Great post.    Congress got strong-armed by HUD and President Bush into passing the DPA ban as part of the bill.

When the housing market declines further, which it will as a result of the banning of seller gifted DPA, and a few of the nation's top homebuilders close their doors, which will also happen as a result of this, and a further 20-30% depreciation in home values occurs, as is now being predicted by Morgan Stanley, Congress will once again be forced to take action.

As we have seen, the nation's economy is directly tied to the housing market.  

You can pass all of the economic stimulus bills you want and come up with every toothless, ridiculous foreclosure bill you can think of but virtually eliminating first time homebuyers (30-35% of the market) is about as detrimental to the economy as you can get.

They threw the baby out with the bath water on this one.   Let's hope they come to their senses before the devastation is beyond repair.

For those that argue, "if you cant save 3.5%, you shouldnt buy a home anyway," please tell that to the boys from Iraq and Afganistan when they get back home and the other Vets looking to take advantage of their 100% VA loan.  

More and more homework is becoming necessary for those trying to get into the market.

I believe that larger down-payment would help keep people in their homes. Times have changed dramatically. I think the mortgage meltdown has tough many; the hard way- that things need to change.

Hi Jeff - I remember my Dad telling me how long it took him to save the down payment for his first home in 1959 that cost $6000.  I remember borrowing $2500 from my parents to be paid back by a college stipend to buy our first home in 1969.  I can remember the nervousness we felt when we went all the way up to $80,000 for a house.  And I could go on.  My point being, in the past if you wanted to buy a house, you did without the extras to save up the money to buy the house.  Today, that would be renting something smaller than what you'd really like to have; not having cable or satellite TV; having dial-up instead of DSL; getting a Tracfone and using it sparingly; not having caller ID and the other extras on your landline; eating out basically never and saving leftovers to eat another day; making one pair of sneakers last as long as you can; getting new soles on your shoes instead of new shoes; etc.

We had to sacrifice less than our parents did, and we Baby Boomers wanted to make sure that our kids didn't have to sacrifice at all.  So for the most part we didn't teach "saving until you can afford something" and depriving yourself of something now so that you have a chance to make something better happen in the future. 

We ourselves started seeing everyone enjoying vacation homes and took our equity out of the house so that we too could own a second home.  We thought that medical care and pensions would make our life comfortable when we retired, and they went away or cost a fortune.  We gave to our grown-up kids when they had to have help, leaving ourselves short for the future.

We are all paying the price now for the changing values that we embraced, and we are not blaming ourselves!  It must be someone else's fault that someone can't afford a house.  So raise the minimum wage, give tax breaks, make the wealthy pay more in taxes, give them more benefits - do whatever you have to, but don't make them sacrifice or have to save, don't suggest that they study to get a better job, don't expect them to say no to their kids when they can't afford it.

Why is it always someone else's fault?

Priscilla Senecal

"Ah, politics....  doesn't it boil your skin when politicians make up housing rules, kill a certain program, or change things up; when they don't have a true understanding of how all of this works?  That they aren't in the trenches. Shouldn't we just allow the market to take it's course?  Yes."

You hit the nail right on the head.

Renee's reference concerning REO properties in Las Vegas as a Sellers market has nothing to do with them being REO's -- it has to do with the pricing. If new homes or non-reo homes were priced the same way, BUYERS would certainly choose the new home or the regular home over an REO property any day of the week. Heck.. if short sales and dealing with the banks was not such an issue, buyers would rather buy a short sale from my experience.

While the decline in prices has been unfortunate, the sooner they correct is the sooner that it will get better.. Taking money from some programs and shifting it to others in the attempt to keep prices where they are is only going to prolong the pain...

The "sellers market" for REO properties in Las Vegas certainly proves that.

All great comments...

Unfortunately parents and schools are not teaching kids anything about saving and financing.  In a perfect world, saving is great.  Unfortunately, it might put us deep into a depression to do this.  We are not in a position to retrain everyone under 35 and we don't have time for them to save.  Our economy will collapse.

Also, I think the middle class are the one's being taxed to death... the wealthy have ways of not paying taxes.  Seller DPAs don't cost tax payers anything.  It's the other Bonds and Grants for low to moderate income that cost us all money.

RICH..... well, thank you very much for those polite compliments. And if we all agreed with each other, wouldn't these forums and comments be very boring and genaric? 

JOAN.... we pretty much agree on the same things...  and yes, the politicians aren't helping. They, in my opinion, care about the votes...  they need to back up and give better answers, as I mentioned to Laura below.  thanks

LAURA.....  yes, the realities, not hidden by half misleading figures that aren't broken down. I haven't see one person or entity, or politician break the foreclosure numbers down when it comes to DPA loans... who were these people that foreclosed that had help with DPA...???  And like I stated, can this blame be put on the lender, for approving someone that shouldn't have gotten a mortgage to begin with?  Were their qualifying ratios higher?  I want specific answers and not a general number.

THESA.....  hey, in all honesty, I love this market... it's weeded out many that didn't belong. But I will be very honest... without the DPA's, it will be a lot worse. Yes, we didn't use them much prior to 1997... but the market wasn't as bad... the economy wasn't as bad either... and the average savings per borrower was much better back then.  and thanks for the compliments...

BOB....  we should send this blog and all comments to every politician then... right?  Thanks

AARON.... if I had more room in my blog, not to make it longer, because i think it is long enough, I would have included your whole comment. I think it is pretty much right on the money. And 2 comments down?  In my opinion, 10% in many cases did not keep the house from foreclosing... people don't understand. It's like the elements of weather...  You are more in likely to get in an accident with bad weather than on a sunny day. Same as homes... you are more in likely to foreclose on your home due to loss of income, death in the family, or other reasons, than just because you only put 3% down or no money down, than 10% down...

COURTNEY..... bingo... and in all honesty, people should have not trusted so easily in the past and did the same amount of homework. The only good thing about this market is that it has kicked out some that didn't belong in the first place. And some that are hanging on, are giving the false or misleading information just to keep the deal in their backyard per se... not to lose it to the truth... until they kill it at the end.

I totally agree with your statement that DPA is not to blame for current foreclosures. We've been using them in previous bad times & the people have survived, thrived even & kept their homes.  I just sold a foreclosure & you know why the owner went into foreclosure?  She used her home as an ATM machine & sucked all the money out 6 mos after she closed.  In the end she received 100% financing - someone told this buyer how to do this as I don't see the extra money anywhere in the house. (New kitchen, baths, etc.)  So who's really to blame?  The owner?  The bank who was stupid enough to give her 100%+?  They both are!

Jeff- The DPAs are needed and getting rid of them is going to hurt the first time home buyer who supposedly the government is supposed to encourage to buy a home. I wrote a post on Monday about NAR lobbying for this farce of a bill. Even the tax credit is not really a tax credit. The government just ruins every bull it touches because they get paid off by their contributors and could care less about their constituants.

Jeff, you know, I didn't even think of the elimination of DPAs as opening a door for fraud?  It is sad that it takes a few bad seeds to ruin things for the folks that follow the rules.

When they passed this bill the government got bigger, the consumer got nothing, and the banks got bailed out. In the end consumers lose out with the stopping of the capital gains rule, FHA getting half the equity in a write-down deal, with the $7500 loan (not a credit) to the goverment that will result in annual audits of their tax returns and the IRS increased ability to monitor credit card payments.  The only benefit is that this is supposed to stabilize the flow of cash from banks to consumers.  Unfortunately, those in Washington aren't Real Estate practitioners and don't get it. It will get tougher out there and the only ones that will get the loans are the ones that can prove they can repay it...what a novel concept.

Does anyone have a link to the entire text of the bill?

www.aaronsauditorium.com

My objection to the elimination of the Down Payment Assistance programs is that is interferes with the rights of the home owner. 

If a home owner wishes to gift 3% or 10% of their equity, based on an honest market appraisal, it is none of the government's business. 

MOTT.....  I semi disagree.... I talked to two clients back on 2007, that both put 20% down and were facing foreclosure.... why?  Someone lost a job....  in both cases.  I have a neighbor that found me on here, and they are having a tough time. They are doing everything possible to save their house... extra jobs... paper routes at the age of 30 with regular jobs and babysitting 3 kids at the same time. And they have equity, but can't refinance... they have $40,000 equity and this is after their house has depreciated by $50,000 already. I could define this more, but I might do it in another blog... Please read my comments to Renee, Jan, and Laura...

PRISCILLA..... these are some excellent points and you should write a blog just based on this. I agree... hey, I love materialistic things... some people will sacrifice other things, just to have something and not save.  But even if someone qualifies and doesn't have money, what is so wrong with this.????  There is more to this comment.... more later..  thanks for your comment.

PAUL.... you also hit some key points. And yes, taking money from some programs to help out others... isn't that like robbing Peter to pay Paul???  lol   The gov't does this very well also... and now they want to crush home ownership, and possibly line their pockets?

BOB L. ...... just as Priscilla mentioned, this is a very good point. Savings and spending need to be taught in the schools... and also within the families..  some good input, thanks

LYN...... yes, using the house as the ATM machine. Broker Bryant first wrote a blog about this about 1 1/2 years ago.  So many American's did this and lenders helped them.

Hi Jeff...Several days ago I mentioned to a friend that even without anything catastrophic happening to a family, they may not be able to keep up with their mortgage payments. 

Considering the price of gas, the additional cost to heat homes (my 91 year old mother's budget plan increased from $275 to $481...no typos there), the higher prices for bread, milk and many other staples, a big increase in the cost of electricity, and you wonder how some people are able to manage.

This can be true for those that put nothing down or those that put 20% down.  These are just hard times for many.

Kate

Elimination of the DPA programs is going to seriously affect what current sales we now have.  First time/entry level buyers are still driving the market and unfortunately, elimination of those programs is going to have an effect.

Jeff--Congrats on the well deserved star! I too believe that DPA programs were helpful. I don't believe that every zero down program was as successful as many of the DPA programs. Almost every DPA buyer that I worked with (either representing the seller or buyer) is still in their homes. They were prepared by the program for home ownership and most loan officers were careful not to put them into risky adjusting loans. Everytime we take a group of buyers out, it willl affect the market. Every additional dollar required will mean it will take that  much longer to save a downpayment...Or that buyer will chose to buy a lower priced home. Those things do affect the market across the board. Only time will tell for how long.

I rather doubt DPA programs funded through private sources are the greater cause of foreclosures within the FHA program.  Quite frankly I have read so many different statistics I doubt any of them are accurate.  In truth the FHA program is a flawed but necessary program.  To eliminate one source of down payment assistance and leave the only alternative "government/state funded" programs makes me extremely curious.  And raising the down payment requirement from 3% to 3 1/2% is just another government scam.  We must reconcile ourselves to the fact that in this partaicular segment there may be a higher foreclosure rate.  As it was disclosed to me by a FHA underwriter, the program was not designed to prevent foreclosure, it was designed to open home ownership to many who could not afford to participate.  Ok, I clearly understand and I believe private sources who provide down payment assistance are just as relevant to the success of the program as government sources.

This is going to be a rocky readjustment period, but we won't collapse as a nation. If the lending industry was 'brilliant' enough to create interest-only loans, DPA loans and stated income loans, to mention only a few 'helpful' programs, they will certainly get their algorithm on and come up with another way to make money as we climb out. Solutions will begin to make their way to the top of the media, instead of the crazy doom and gloom we are now being force-fed.

we too think the true nature of what we're all dealing with has not fully revealed itself yet. we're not being cynical, or pessamistic, we're up, but still think that's the way its going to be for a while.

there is nobody in charge, and things are not going to change until someone is.

best

Jeff, great post here and I really do not think that a lot of these people that are leading the charge on killing off DPA knows what they are doing. I had a Realtor email me the other day who I know has been vocal in stating that DPA is "BAD". She wanted to know if she could get her customers approved using the very program that she was against. In my opinion, double standards.

Which brings me to another point. If a loan officer tells you that a customer is not eligible due to XYZ, then why do we continue to shop that person around? The whole reason is we are looking for a way around it. And that is all good, but accept the circumstances that might come of that. OK, I am getting off my soap box.

Hey Danny -  let me take it one step further    if a manager ( me ) tells a loan officer there is nothing there yet the LO clings to the deal like a life raft even though there is NO heartbeat in the deal left......oh well....   I think I just jumped on your soapbox!

Jeff -  someone needs to tell HUD and all the politicians to STOP THE NONSENSE! Stop the inflating of sales contracts, stop the shuffling of money, stop allowing the "non profit " DPA's to make a profit and create a 100% FHA purchase program. Anyone heard of USDA loans? 102%.....   cmon now....   3% is really going to make a deal perform or not...   i mean the flexible souce of funds to meet the 3% requirement is nuts in itself if you ask me.....   and what's up with only 2.25% down payment needed but 3% must be in the deal....  who comes up with these formulas and rules?    SIMPLIY FHA! It can't be that hard can it?

You make several worthy points...but we agree on one thing...that requiring a larger down payment will not keep foreclosures from happening.  I think that the majority of people truly believe that they are going to be able to make their payments for 30  years but unfortunately life changes for the negative sometimes...people lose jobs, get sick, and get so far  behind they can't catch up. 

Great post Jeff! It's amazing how information people automatically believe is true. It's also amazing, how much bad information that others are willing to post.

yeah we are ina ride for sure... but how long will it last , im thinking over 10 years easy!! thats some ride...

Jeff, I've heard their is lobbying going on to keep the DPA programs going, I know I sent in a letter for Ameridream last week. On the other hand it is too much to ask for 3.5 of the borrowers own funds. Gee, when we bought our first home in 1979, we had to come up with 3% to get in, we saved and my parents and grandparents helped. So we got in.

First time home buyers can take money from their 401K's if they are buying.

I'm upset too as many of our last transactions have involved Toyota employees who have great credit, good income but used the Neihamah and Ameridream program. Funny thing is if those programs had not been around they could have purchased anyway.

I'm in a wait and see mode.

I like Rich's suggestion above and Jeff Turners echo of it.

When I read some of the more well written blogs like this one, and it points out a position contrary to what I believe, it is so difficult to decide what is really best for the country's economy overall - lower standards and more programs, or higher underwriiting requirements and throw out the programs.   I think we are at that point if we are to help the economy as a whole - you can't have it both ways - you can't have all of the assistance programs and expect a miraculous shift in consumer responsibility.   We are a different society now.  In Gwinnett County (metro Atlanta) another layer of the problem has been years of overbuilding.   Pools in subdivisions sitting empty as havens for mosquitoes - geez, there are so many layers to what we are facing right now.

NESTOR & KATERINA..... your first sentence is what cracks me up in a sad laughter.  The gov't and HUD pushes first time homebuyers. HUD was and is all about helping low income families, right?  Aren't many low to moderate income familys strapped for cash?  How does one save?  If anything, just raise the standards then when it comes to qualifying. How about this.... penalize those lenders that keep making bad loans... take their FHA ID number away then...  I know there were many that made bad loans that are now closed by HUD...  are these lender's loans in these foreclosure numbers?  I would bet the house on it.....  lol

AUDREY..... I am not sure if I really mentioned that in this post... I need to go back and read it.. lol  But in any case, yes, in my professional opinion and that of my head underwriter, we both feel that the elimination of DPA's will open up the door to fraud.  One case that comes to mind are silent seconds. ..or.. a lender and appraiser working together, now trying to force a much higher appraisal, if the underwriter overlooks it.... this needs to be thought about...  thanks for bringing this up.

AARON Z. ......  I haven't had time to read the bill, but your comment basically states what many of us feel. The politicians need to review the figures and pick them apart...  and not just say, hey, we have foreclosures.

LENN......  bingo and ditto....  if the real value is there, let the borrower use it to their benefit. How come the gov't didn't jump in with the conventional 100% and 103% financing?  Wall Street begged and got greedy.  Yes, killing the DPA's will kill real estate and hurt not only first time homebuyers, but buyers in general.

KATHLEEN aka KATE......  first off, thanks for the polite mention in your post the other day. But you basically state that many of us of mentioned before....   people in today's economy just can't save like they use to... bottom line.  And buying homes helps stimulate the economy... rut row... now what...

CHRISTINA.....  I agree... as you mentioned, there are tons of new buyers, first timers, and this will hurt... bottom line.

In my area at least, MOST of the foreclosures are coming from investment properties.  Why don't they just tighten the belt on investment lending, and keep it a little looser for people buying their own primary residence?  Seems like a simple solution to me.

TERRI.... thanks for the compliment. It will be 16 years next week that I have been in the mortgage business. YTD, I know that I have had 3 clients that have gone into foreclosure. 1 of them had a loss of job/income and the other a loss of a family member. None of these were DPA loans....  again, as I have stated, I would love to see a breakdown of every DPA that was foreclosed upon and see what the income ratios were and how their credit was.  As I have mentioned in another post, I read about a builder in NC that sold about 180 units and of those, 150 of them used DPA.  And all the appraisals were inflated, hence why I think these numbers that HUD put out are very misleading.  They say that 1 out of 3 DPA loans go into foreclosure.  Okay?  Since they started?  Just in the last 3 years, when the economy started to tank?  I want answers... lol 

PATTI..... a big point that you mentioned is so true. FHA loans were designed to help home ownership become a reality. And adding an extra 1/2% to the monies needed and no DPA help?  Ouch...  I hate looking reality in the face, but watch it get worse out there now...  it could now take people an extra 2 to 3 years to buy a house now, just to save that money up. Just my opinion, but I would love to hear what the politicians have to say on that one.

DAWN.......  I kind of semi disagree....  I don't think the mortgage industry will come up with anything new or creative.  Why do I say this?  Wall Street at this time can't take any more large risks... and the foreign markets won't help bail us out or buy the back end of the mortgages now. Not what happened in the last 2 years. We have gone back to the basics of lending for now and in my opinion, I think it will be like this for the next 3 to 5 years. Again, it goes back to risk...  Pay Option Arms weren't a bad program, but it was sold very loosely and wildly by amateurs. By loan officers that wanted to make a quick buck and didn't explain it very well to the consumer. We first need to clamp down on the deceptive lending practices first, before investors get crazy with loan programs again. I think we will see a major decline now and more fraud again, because people will try to get around the issue of needing money now, to buy a home.  Again, just my opinion, but I see it happening.  Check back with me in a year and let's see how close I am to this.

GARY......  a very good point. It's like the blind leading the blind per se. Who will stand up and lead us?

DANNY......  no, continue the soap box rant. I have helped plenty of people that were told no, because many loan officers don't even know how to make a normal deal work. Whe I say normal, I mean a person that is credit challenged. You need to know how to decipher credit... and I have helped 8 people just this year that were told that they could get a mortgage, later to be told, the day before closing, that they can't get a loan. It's bad out there....  we need more professionals that actually know what they are doing.  But now, with the gov't jumping in, it will create even a larger mess in my opinion.

In regards to the realtor with the double standard?  My opinion?  Sorry, but I don't care for people like those.  Sounds like someone that is just interested in a pay check. And what about those lenders and loan officers that took consumers down the subprime path, because in many cases it was easier for the loan officer.  But now that most of those programs are gone, those same lenders and loan officers are now signed up for FHA... "double standards"  rut row....  sorry, but these people should not be in the real estate or the mortgage industry.

LEWIS......  good point in regards to Danny's comment.  It's those same loan officers that tell a consumer... yes, yes, yes... and then 30 days later that same answer is now.. No, sorry, it can't be done.

In regards to FHA and the DPA loans... yes, bring out the 100%... but I would think that the guidelines would have to change for these then. Higher credit scores?  Staying pat on the income ratios?  >>  not exceeding them by more than 3%, if that?  I closed a loan 2 months ago, getting $19,000 from the seller and all went through a DPA, with only $1,000 out of their pocket....  and we had a 52% back end ratio... a manual underwrite. How many can say they can still do that?  But if the DPA was gone then?...  they don't buy.....  they stay in their current home, cramped with a few new kids...    overall, something needs to give... but who is giving in?  thanks

Jeff - I get those loans done as well. I get very low credit scores done like you also. It is not always about the credit score or debt ratio  .....  it is about  the ability to repay ...   and the question an underwriter must ask themselves - will this loan peform   then   what happened to the credit with letters of explanation..

I don't buy that the higher number of foreclosures were sub 620 scores and high debt ratios -  i don't buy it one bit!

The statistics may prove that but if those loans were manually underwritten with the questions above applied, there would have been less loans approved. Cmon! The way DU / LP could be tweaked a few years back.....  all we needed was that approve/eligible    if the DTI was too high we would drop the rate 1% and get an approve up to 1% over note rate....   if your kept getting levels you added assets as many of times it would get the approval yet never ask to validate the assets....   50% DTI was easy.....  100% interest only  LPMI  my community   cmon!   who needed FHA back then    i am sure you and a few others here new the tricks......   was it the LO's and investors who are too blame or was it created by a machine? A big time hole in the automated approval engine..i mean, all underwriters did was follow the rules and validate..

I think FHA could roll out a true 100% program with a tweak here and there and more common sense underwriting versus Fannie / Freddie   you know what, i'm fired up and think i will blog regarding this topic....

Jeff,

Thanks for the post. I was beginning to think that I was the lone horse. I have been posting comments on this subject and my stance is that the eight year run on a bad economy is the major culprit and that the mortgage meltdown is just one component. I don't understand why more people aren't getting it.

KATHY......  I think the majority of the foreclosures are of two things.... 1. misfortunes .. aka loss of job, loss of family member supporting househol, bad divorce, etc, etc...  2. loan officer that put a consumer in a bad mortgage.. and lied about it.  Telling them that the payment won't change more...  etc, etc.  There is more to this, but these are the basics.

LISA.... well, what's sad is that you can't help to believe the information. You expect it to be true, unless you ask the author for proof. But we just tend to believe what we read. hence why it kills me to see a mortgage blog that is very misleading... or those that sound like fact, when it's actually someone's opinion.  thanks for the compliment.

PJ....  Yes, we are in for a ride, but I think 10 years is way to long. I think it does come down to what happens with this new bill that I mentioned to Missy. If it passes, it will help...  but I would say a good 3 years... it depends on how bad the foreclosures get and what happens with this election.

MISSY...... yes, there is a new bill that 3 congress people are working on and it should be introduced in the next few weeks. Hopefully there is enough support that this will be overturned. If it is, I would bet that there will be some provisions added to the new bill. One that I would see taking place is that the buyer will need 2 to 4 months of reserves.

Overall, yes, it is very hard to save. i just wish they would break down their figures, in regards to the DPA's going into foreclosure. Okay, compile a list of why and how....

STEPHANIE.....  I agree.... if we are to allow some of these special programs, then raise the standards just a little... still allowing many to make that American Dream happen. And in regards to the builders... yes, many did build up to much and they are suffering in some parts of the country.

PAM...... no solution now is simple. You have to have very good credit scores, above 680, to typically get an investment property with 10% down.  Kind of like going back to the mid 90's.

LEWIS.....  you get fired up my friend..  ;o)  As you mentioned, common sense. 100% my community, allowing a 59% back end ratio in my book is not common sense.  Even a 55% back end. After taxes, what is left of someone's income?  it was called greed... if we tweeked the system to allow such high ratios, all you needed was an accept/ elligible, then everyone was off to the raises. How about those stated loans with fixed income, W-2 income???  come on...   In any case, looking forward to your blog.

WILLIAM..... my pleasure and thanks for stopping by. Yes, the economy.  But for some reason, that's not a good reason to these politicians. They seem to want to make excuses for others, pointing the figure at other people and or programs.  It's sad and we need some people to stand up to point this out.

GREAT POST!  WE NEED MORE LIKE THIS!!!!!

There is light at the end of the tunnel though.

Excellent post!  I've been feeling like I'm on a roller coaster for some time now and I HATE roller coasters.  At this point I am just hoping the the safety lock keeps me strapped in and prevents me from flying out of it to my dimese. :)

Jeff;

This is a great post as are all of your posts.  I am in complete agreement with you.  I have been doing FHA with DPA since 1997 as well.  During all of these years I do not know of one client who was foreclosed upon due to the lack of down payment.  Life brings changes to every household that can have an impact on their financial situation.  Loss of job, illness, death in the family - I could go on and on.  

We have no control over what happens after the loan closes.  I have been thinking lately about all of the credit offers our clients receive after their loan closes.  How many of them were solicited for 2nd mortgages, credit cards, lines of credit.  (some as high as 125%) How much debt have they taken on after their loan closed.  

It doesn't make any difference if the seller contributes the down payment via a Non-Profit or if Mom & Dad gift the down payment.  Either way the client has no $$ into the transaction.  I personally think having some reserves is far more important than having a down payment.

Down Payment Assistance has nothing to do with the numbers being foreclosed upon.