Obama administration pushes banks to make home loans to people with weaker credit

[Yo_Mama]

92. Yes, but the long term doesn't matter if the short term doesn't work

And while we can count on housing appreciation over 20 years, we can't count on it for the next 5 in many markets. And the first 5 to 7 years is where you get beaten or proved. That's all that matters to me.

Heck, let's be honest. The idea that long term housing never goes down was precisely the justification used to argue that irresponsible lending practices weren't irresponsible in the late great housing autodestructonova we created. The theory was that if we never forced the borrowers to pay back any of the principal then we wouldn't have the day of reckoning, and that housing prices would never have to fall. That type of thinking is what drove so many responsible buyers out of their homes. Applying it again is going to produce the same result. What always kills these things is buyer exhaustion, and we're close.

The fact that rents are already dropping where the big block PE purchases have been made makes me wary. Also, I read FHA reports every couple of months. They are getting scary again.

http://portal.hud.gov/hudportal/documents/huddoc?id=ol0113.pdf

Oh, I expected FHA once again to laughably underestimate this year's claims, which have increased 48% YTD compared to 2012 YTD. I expected huge numbers of rollover refis. What I did not expect and FHA did not expect was the massive drop in TOTAL (AUS) approvals. 56.7% for fiscal year 2013? They were projecting over 84%. Last year was up in the 70s.

That means that we have very large quantities of manual underwriting going on, and that the market is adapting. We've also still got a current serious delinquency rate of 9.5%. Because FHA is the backstop for those low DPs, we can't afford to let it go down, but it is in big trouble already. Big trouble. It doesn't need to get in any more trouble.

And then look at the massive number of refis - up 200% so far this year compared to YTD 2013. 200%. And 80% of those suckers streamlines, meaning no appraisals. You think a load of those aren't underwater? And first-time purchasers are up a measly 2.4% YTD. And total purchase apps are down 4.1%. But total purchases are up 0.4%, because now virtually every purchase app is approved.

Anybody who's following along knows that the same old same old is getting underway again. It won't be as large but the whole system is already getting stressed, and there will be fallout.

When you can't even get first time borrowers to plop down a 3.5% dp (WITH new DP assistance programs sprouting again), you have a situation in which the real market is extremely weak and prone to fail.

It isn't going to be different this time. It never bleeping is. FT buyers support the whole freakin' market. When they dry up, the market dries up. The PE bots are going to be fading out before we can really pull in many more FTs.

Well, hoohah, April 1st FHA premiums went up again, which I'm sure is going to make this mix look even more beyootiful. This is a big blivet of a housing market. June 3rd of this year FHA extends the MIP period to 30 years or the life of the loan for LTVs higher than 90%:
http://portal.hud.gov/hudportal/documents/huddoc?id=13-04ml.pdf

I guess they are hoping to cover those underwater streamlines that way.

There's a lot going on in this market, and a lot of it isn't encouraging. Demand means jack because demand will fluctuate with available terms and then with failures.

The whole reason that TPTB are trying to get credit standards down is because demand is failing. I cry BS.