The FHA dropped mortgage-insurance costs an average of $900 a year and their loan originations for mostly first-time buyers soared 54% YOY in September. Um, if saving $75 a month on mortgage insurance means you can then “afford” a mortgage, then you actually can’t. Any unexpected bill will probably put you behind in your payments. But no matter, governmental home ownership cheerleaders want you to have a home with just a trifling amount down and low credit scores are no problem, just sign here. Why this almost seems like a return to the fabled days of NINJA (No Income, Job, Assets) loans and we all know how that ended up in 2008. Well, no matter, Wall Street needs to securitize toxic glop again and the government is happy to help. Jump on in muppets, surely this time is different.
The FHA estimates that borrowers save $900 a year on average as a result of the lower premium. The move made FHA-backed mortgages more competitive with other loans that have low-down-payment options, said Guy Cecala, publisher of the newsletter Inside Mortgage Finance. While mortgage giants Fannie Mae and Freddie Mac have an option for borrowers to put down as little as 3 percent, they require private insurance with risk-adjusted premiums based on credit scores, debt-to-income ratios and other factors.
“It still costs more to get a 3 percent-down loan with Fannie and Freddie if you have a lower FICO score,” Cecala said.
Rinse and repeat. Socialize losses and privatize profits. This time bankster bail-ins. Same game, extract the wealth from the muppets differently this time
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The Bigger-er Short: Part II – “House-Ocalypse Now Redux HD 3D IMAX in your face with more puking Unicorns and 10x’s the dead Muppets of Part I” coming soon to a theater near you! 😉
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Yeah, because the solution to overpriced assets is low-cost financing… This way you don’t feel all the pain at once.