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Prime loans, fannie mae etc are at 43% back-end as well so?....
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Fannie Mae is not exactly one of the best examples of an institution to use when defending underwriting standards. Have you read the news in the past 3-4 years?
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Though don't you think if FHA wasn't making an overall profit it would still provide FHA loans especially given it's current default rate? I doubt it.
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You assume too much. David Stevens admitted that FHA capital reserves were dangerously low in 2010, and is taking steps to bolster its reserves by increasing insurance premiums. Straight from HUDs website.
http://portal.hud.gov/hudportal/HUD?...1/HUDNo.11-013
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As well as ~6+ months reserves PiTi. What happens after ~6 months of no job? No matter what loan you are in, if you don't have the reserves, and you lose your job, you're screwed. All lenders want to see employment history and "good" credit as well as reserves. There is never a guarantee the borrower will be able to pay off the loan, all you can do is qualify them and show the ability to repay.
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But people with only 3.5% in the game default at a much higher rate than people with 50% in the game. The more money you have in, the less likely you are to default, this is unquestionably, statistically proven.
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I will agree to disagree. No point to try and pound how we feel 10 different ways. We obviously have different feelings towards this topic.
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We can have different feelings, but facts are facts.
- FHA has a bad default rate
- FHA as an institution has low capital reserves, they aren't making money.
It's not a solid loan product no matter how you paint it.