Wealthy Borrowers Qualify for Low-Income Loans

[midnight]

Source: Bloomberg

If you’d like to buy, the Federal Housing Administration -- the agency created to aid low-income and first-time homebuyers - - can help. Not far from the ski resorts of Telluride, an FHA- approved borrower can pick up a five-bedroom, four-bath house with stainless steel appliances and a two-car garage for about $600,000.
The agency, created during the Great Depression, has found itself insuring high-dollar loans in hundreds of counties across the country, from New Jersey to Florida to Arizona. Such loans are drawing renewed scrutiny as lawmakers debate whether to expand FHA lending to even wealthier borrowers.
“It’s not the intent of the FHA to facilitate people buying McMansions,” said Representative Scott Garrett, a New Jersey Republican opposed to higher loan limits. “The intent is to help the average American buy the average house.”
Congress is weighing a proposal to restore higher loan limits that expired on Oct. 1. The measure, already adopted by the Senate, would allow the FHA and government-controlled Fannie Mae and Freddie Mac to insure single-family mortgages for as much as $729,750, up from the current $625,500, in high-cost parts of the country.

Read more: http://www.bloomberg.com/news/2011-11-08/wealthy-qualify-for-mortgages-intended-for-poor-under-higher-loan-limits.html

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The rich don't feel they should have to pay more for a loan than the poor and so this program helps them out....

[dkf]

1. The advantage of FHA loans are the lower down payments not the rates.

At least that is what I've seen.

[rucky]

2. Trying to preserve property values in still-overpriced areas.

It actually helps underwater homeowners in those areas sell their homes more easily, and without getting soaked too badly.

[midnight]

15. I thought about that, but if those in this business cared about the underwater

mortgages, other steps would have been taken don't you think...

[dipsydoodle]

3. Its partly because they're considered to be lower risk

That's life.

[liberal N proud]

4. Ruthlessness helped many become wealthy

It's the old fashioned way!

[xchrom]

5. Recommend

[olleander]

6. Broken system

The normal economics of the housing sector were destroyed by
the rampant fraud and regulatory collusion in the Bush years. 
The Obama years have seen no improvement because the agencies
headed by his appointees all come from and are going back to
the banking sector which is the root of the fraud.  This is -
in the grand scheme of things - an inconsequential issue
affecting few people.  It gives the appearance of doing
something ... like mowing your lawn while your house burns
down ... Hey, sorry about the smoke and flames but as you can
see I'm keeping the grass nice and short.

[Chan790]

8. It's worse than that...

it's a conscious step in the long-game by the haves to corner real-estate by locking down access to lending at the same time they depress property values and push ever more people underwater and into default.

It's like I just posted downthread...Cui bono? (To whose benefit?)

Use the extreme example to build populist rage against the commoner's best interests...move on to the next step before they notice that you just screwed them...again.

[Chan790]

7. Cui Bono?

Does nobody know anymore to read critically and wonder Cui bono? (To whose benefit?) It's not a credible piece of journalism; it's clearly a hit-piece written to evoke populist rage against the best interests of the public by citing an extreme example to undermine support.

Hint: Not renewing this program will both further depress property values and tighten borrower access to loans. Who does that benefit? Remember that real-property is an limited-asset far better than gold or commodities or complex opaque fiscal vehicles like credit derivatives & will hit a price-floor (one that becomes more concrete as more and more potential buyers are locked out of market).

[mntleo2]

9. Wish they'd reinstate 235 ...

...what happened beginning in the Reagan administration is that, when the housing boom began and prices began to go up, wealthier people began to buy HUD housing at pennies on the dollar. Then they rented these houses to low income people with a lot of incentives and tax breaks for being so "nice" as to rent to a low income family.

Before that was a program called "235", which allowed low income people to buy houses that carried mortgages paid according to the family's income (at that time 1/4 of their gross income). This allowed low income people to buy their own homes and raise their children in stable neighborhoods.

Now these homes are only affordable to make high income landlords richer and force the low income to be renters, never being able to even dream they would be able to stay in one neighborhood and raise their kids. It also means that residents have no stake in the houses or neighborhoods where they live, knowing it is never going to be a permanent place to raise their kids and grow old.

235 was a way to help people become "independent" as they had a lifetime investment in where they lived. Even a family that was VERY low income could afford a home of their own. They could not sell it until they had lived in it ten years (I think) so it was not a building they could "flip" or buy and sell quickly. Sometimes it was new homes built and sometimes existing housing was allowed for purchase.

Then they wonder why so many neighborhoods have gone under. These millionaires not only care about cheap housing for themselves, it allows them to rape the government and the poor another way ~ by becoming slum lords for high rental homes.

My 2 cents

Cat in Seattle

[MedicalAdmin]

10. This!

[No Elephants]

13. Thanks for the perspective.

[Trillo]

11. Nothing new about this.

It's part of a bigger pattern of the wealthy feeling they're entitled to any and everything the poor receive. The fly in the ointment is that there are plenty of things the wealthy have that the poor do not have. Besides the obvious, like fancy homes and the finest medical care, etc., there is also the fact that the wealthy have corporations to shield their income from taxation, legal fictions that the poor do not have. For example, the poor cannot deduct most of their expenses related to employment (their main source of income), but corporations can deduct pretty much all of their expenses in the course of their own pursuit of money. That, it seems to me, is why the wealthy have corporations.

This story is just a cog in a much larger mechanism of many gears that ultimately run a grinder whose main effect is to chew up and spit out those humans who have less money. After all, money is of little use unless you can have more of it than the folks living next door.

[freshwest]

14. Well Said!

[No Elephants]

12. "Low income loans?" The headline writer should be fired.