FHA Watch, September 2013 (Vol. 2, No. 9)

Article Highlights

  • If a loan performs like subprime, it is.

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  • FHA lending policies continue to harm low-income and minority families.

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Explore the Nightmare at FHA project.

This Issue’s Highlight

FHA’s Disproportionate Impact: Default by Design

The Consumer Financial Protection Bureau’s (CFPB’s) new Qualified Mortgage rule exempted Federal Housing Administration (FHA) underwriting standards until 2021. The subsidies and exemptions FHA-insured loans enjoy generally qualify them for the CFPB’s designation as “prime loans.” Yet, an FHA 30-year fixed-rate loan with 4 percent down, a 43 percent total debt ratio, and a 580–599 FICO has an expected foreclosure rate of 28 percent. The CFPB calls these loans prime, but if it performs like subprime, it is. This lending standard is having a disproportionate impact on low-income and minority families.

This Month’s Features

Spotlight on FHA’s Disproportionate Impact: Default by Design
Subprime by Any Other Name Is Still Subprime

Spotlight on Property Valuation Practices from 1903 to the Present
FHA Has Abandoned Former Boom-Resistant Practices

Spotlight on Insolvency
FHA’s Estimated GAAP Net Worth Equals –$26.68 Billion, with a Capital Shortfall of $47–67 Billion

Spotlight on Delinquency
Overall Rate Increases to 15.03 Percent in August from 14.94 Percent in July

Spotlight on Best Price Execution
FHA, VA, and USDA Pricing Advantages Largely Unchanged

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