Agreed. Why would I look for an argument this week anyway? We have a common enemy.
Kbuck (or anyone who knows) - perhaps you can enlighten me. I know that many of these loans are FHA loans, something about which I admittedly know little - how does that affect the approval process or the mortgage requirements. If these loans are federally insured, what impact does the rash of foreclosures have on the greater economy? What is the source of the federal funds that back these loans?
Okay... yeah... FHA loans are loans that are designed to encourage home ownership that are insured by the FHA (think HUD, because there are some other agencies involved but HUD runs them all, more or less). Anyway, theses are the ones that require (with no help from elsewhere) a 3% downpayment. But the difference bewtween these and "Conventional" Loans are that the down payment is actually an insurance payment that protects against foreclosures. So you pay 103K for a 100K house.
They are a little easier to get than conventionals (the 3%) being aimed at first time home buyers, but the interest rate is usually a little more than a conventional.
Now, in theory... what would happen (to really simplify thing) is when foreclosures happen the mortgage company that holds the loan gains control of the property, bills HUD for the expenses and gives the property to HUD, who then liquidates it (Through a number of avenues, most commonly a realtor, "HUD Homes" are something different).
So, I'd say on average, the loss from a HUD Foreclosure on a 100K property would be, in Ohio maybe 20K for all the expenses (Providing the mortgagoe didn't pillage the property or something)... now theorehtically the 3% is supposed to cover it... but like any actuarial type estimate, it can blow up, so it
could end up costing the tax payers.
Conventional loans are the same with the exception that instead of the governmetn funding the loan (or insuring the note) a private entity provides the funds (like Fannie Mae or Freddie Mac or Bob's Bank) and rather than an up front insurance premium you buy Private Mortgage insurance which you are usually required to carrry until you have and 80/20 LTV.. (An 80K or less balance on a 100K loan).
