(Update: Comments from spokesman.)
The California Housing Finance Agency is halting its down payment assistance programs and affordable 30-year fixed-rate loans for home buyers, citing the state’s budget crisis as the cause.
The agency said the programs are being temporarily suspended because it is not getting loans it uses to fund the programs. The agency uses temporary loans until it can issue bonds to repay the loans. It said programs will be stopped until the state’s budget crisis is resolved.
Read the release, dated Dec. 19, HERE.
Ken Giebel, a spokesman with CalHFA, said the agency is funding loan applications that were submitted by last Friday.
And he said the agency is still funding loans to buyers of foreclosed homes.
Giebel isn’t sure how many CalHFA loans are made in Orange County, but the agency made 4,400 in the state for its fiscal year ended in June. That suggests any made in Orange County would have a small impact on our housing market, since 2,000 to 3,000 homes are sold here each month.
Here’s more mortgage news…
- O.C. bill-paying index at record low
- New foreclosures dip, but delinquencies rise
- 8 million foreclosures seen through 2012
- When banks fail
- Retirement savings jeopardized, say former bank managers
- Speedy mortgage payoffs could cost you
- 30-year mortgage at 37-year low
- CA banks drop protection against bad loans
- Mortgage aid scheme a failure
- Bad house, car debts mount in O.C.
- 44% of O.C. home resales were foreclosures
- O.C. home seizures in free-fall
- The next mortgage crisis
- O.C. distressed-home listings take year’s biggest drop
one down… many more to go…
DPA. programs… funded on the backs of responsible taxpayers .. It blows my mind these programs are still alive..
When will this insane real estate business model bust for good?
The real estate business model needs a good overhaul and elimination of 75 percent of the participants including realtors and mortgage brokers.. All homes should be sold via auction to the the purchaser with no realtor or mortgage broker involved. The loan should be done between the government and the buyer.. Eliminate the worthless baggage…
What are the illegals going to do to get a down payment on a home. I guess the “American” dream is shot for them as well.
This has nothing to do with illiegal imigrants you ignorant
Ahhh - ignorance. If Ameise00 new anything about the program they would know that one of the primary criteria for the CalHFA loan was proof of citizenship (Pete Wilson made sure of it). Aside from that, all government FHA loans have to go through the FHA Connection which matches names, socials, and birthdates with the Social Security Administration to verify the borrowers applying for an FHA (government) loan are here legally and using a social legally assigned to them by the SSA.
the housing market decline started the economic mess now the economy is prolonging the real estate decline. I’ve read again that the government may have to step in to help the homeowners who are upside down, i.e, those who owe more for there homes than what the house is worth.
Well there goes one of my options. I had been looking into this for awhile. The 3.5% down was a good way to get into a home, especially at current prices and rates.
Ill have to hunt out another program.
It seems the comments here are confusing the FHA - or the Federal Housing Administration, which is doling out the foreclosure assistance dollars to the states - and CalHFA whose primary role is to fund housing deals based on the strict federal and state criteria for affordable housing developments. Ironically, affordable deals are the only ones moving ahead, while market rate projects are dropping like flies.
That’s a shame but I guess something has to give in this economy. I am a product of the CHFA loans and without it, I don’t think I would be in the home I’ve been in since 2002. I got a fix 4.75% 30 year loan and am an incredibly responsible person both fiscally and personally (aka have no debt, fund retirement/Roth IRA account). This was a great program for people like me who sadly, were considered largely ‘low income’. And to think of all of the high income earners now going into forclosure getting funded for insane loans they never could have afforded…this is why the program being temporarily stopped is kind of sad.
Samson,
You can still buy a home with 3% down via FHA and these days many brokers and bankers are offering FHA loans — those are available nationally as opposed to the state’s very specific CalHFA loans.
But, personally, I have come to wonder if the naysayers are right on this one: perhaps any program that allows for a down payment under 10% is causing more harm than good. At least with FHA, stated income is not allowed.
-Matt, Blogger
LL was wondering why more lenders aren’t doing “forbearance” to create an affordable refinance. He was taking an example where a borrower had taken $600K loan that reset, and said the lender could charge interest on $170K at 4.5%, and charge no interest on the $430K portion the borrower couldn’t afford. When the home sold, the lender would get 100% of the loan back. The borrower could stay in their home that way, and the lender could avoid foreclosing.
Let’s see what the “true” interest rate is in this example, where the borrower pays 4.5% on $170K and nothing on the remaining $430K.
4.5% x $170K = $7,650/yr in interest expense paid to bank.
$7,650/yr divided by the total loan amount of $600K = “true” interest rate of 1.28%.
Let’s assume that the lender’s market rate of funds is the 4.5% stated above. If the lender didn’t want 1.28% return, the lender can foreclose and sell the home for $100K less or $500K in cash.
Then they could get a new borrower in at say $400K (80% loan-to-value (”ltv”)) at 4.5% which yields $18,000 a year in income, instead of LL’s proposal of $7,650 a year in income.
So the bank gets $100K in cash PLUS more than twice the income in the above restructuring.
AND the bank gets the $100K upfront to keep.
If you were a bank, which option would you choose?
Hmmm. It’s a toughie.
Hi Marcia
If my understanding of LL’s posts is correct, “forbearance” only delays payments of principle, not interest.
Your example assumes that interest is only payed on the un-forbeared portion of the principle ($170K). I think in reality, interest would be charged on the entire amount ($600K). Principle, however, would only be charged on the un-forbeared amount of $170K.
In reality, interest per year would be much higher than what you are calculating because you are assuming no interest charges on the forbeared amount.
Perhaps LL or someone else could weigh in on the issue.
I do agree, that 10% down is the most ideal situation. I think the only drawback is that even with prices where they are now, many first time buyers have little chance to buy anything, since the ability to save that much can be tough.
As for me, I plan on only buying something in the 300K to 350K range. At that amount I can easily put 5%+ down. My Fico is over 760 with an income of about 90K. By March I will have zero debt with the exception of a 5K student loan. I don’t believe I will be laid off anytime soon, so my job is pretty steady.
I’d like to think I am more the ideal candidate for a first time buyer program than many…but I havent done much research on getting a loan recently. I do have a few other options, that might help shore up the other 5% if need be.
I guess the problem I see, is that if people like me can’t get a loan…than we are in big trouble. Being that as a nation we have such a low to almost neagtive savings rate, the majority of the homes even at current prices will be far out of reach for most.
like i said before. you can only alter market dynamics on the short term. The market MUST and WILL return to fundamentals.
No help needed to buy a home. The market will provide affordable homes.
Marcia & Brain-
In my example, I was saying that no interest would be charged on the forbearance principal of $430k. Keep in mind this was the most extreme example you would encounter (24k yearly income) and most of the time a lender wouldn’t have to forbear anything close to that amount.
I’m not sure I understand Marcia’s point about the $100k. In today’s market, a lender typically takes a 40-50% loss on the loan amount if they have to foreclose. This would amount to a $240-300k loss in this example. Even during a good real estate market a lender would typically lose 15-20% due to lawyers fees, court costs, Realtor fees, upkeep and repairs on a foreclosed property. When you throw in the decline in home values in today’s market, the losses really pile up. So the lender would not get $100k up front or any other cash incentive to foreclose.
Now the point about getting a new borrower at 4.5% sounds good, but once you figure in the loss taken at foreclosure, it’s not such a good deal. Also, servicers are not necessarily lenders. Many servicers just do loan servicing and contract with lenders to service their loans. So there’s nothing in it for them if the borrower refi’s, and they actually lose their income from servicing fees. (Servicing fees are a percentage of the interest that a servicer gets to keep. Typically 0.5% of interest is kept by them.) So it really is in the servicers best interest to get the borrower paying, even if it’s a drastically reduced amount of interest.
Ah, you see? No interest paid on over 70% of the loan.
If I look at the market for what was a $600K home, you are probably correct in that there is a correction in the home price.
So let’s take a 50% reduction to move the house. A $600K home is probably in a decent neighborhood. Those neighborhoods haven’t had quite the same reduction.
So the bank gets $300K net in today’s dollars.
Invested at 5% over 30 years will give them a future value calculation of $1.3 million.
Let’s assume that it only takes 10 years for the RE market to double again enough for the bank to recover its loan “forbearance”.
In that time, they will have been paid $23 thousand on their $170 thousand loan. They receive a full loan payoff of $600 thousand.
At $300,000 invested at 5% (which is conservative for a bank over the long term by the way), they will receive $488 thousand.
But, the bank doesn’t have to suffer the risk of the borrower defaulting or taking an earlier loss when the borrower figures out they don’t want to pay for a $600 thousand home that is only worth $300 thousand.
The crossover for the bank is 15 years by the way. That is when, at 5%, the bank breaks even.
If I were a bank, I’d take the foreclosure up front now, on the off chance that over the next 15 years, I can do better than 5%.
By the way, as cold as it seems, banks are NOT in the business of being nice or “helping”. They are in a mutually beneficial relationship, “mutually beneficial” being the operative phrase.
Philanthropists are in the business of helping without expecting anything in return. Last I looked, when you look up “philanthropist” in the dictionary, with all the descriptives and synonyms, the one word missing is “bank”.
I’ve been concerned about a new and “improved” Great Depression for about a-year-and-a-half now. When I heard Senator Schumer out IndyMac like that I said “he’s going to cause a run on the bank” to my wife. Two weeks later, there was a run.
You may think this is some sort of joke but we are on the precipice of a global depression. Having a US senator shoot off his mouth to win a few political brownie points is completely irresponsible.