Obama Slashes Mortgage Insurance Premiums For Subprime Borrowers With Just 10 Days Left In Office

Tyler Durden's picture

What do you do when a quick rise in mortgage rates suddenly threatens to tame home buying demand from subprime borrowers who, despite the lessons from the past, are still purchasing homes, en masse, with only 3.5% down payments and just enough monthly cash flow to cover mortgage payments?  Well, if you're the Obama administration then you simply socialize the problem and force those higher mortgage costs on taxpayers.  Anything less would just be a hateful attempt to deny minority and low-income citizens their "right" to home ownership.

And while the Obama administration isn't directly passing out tax dollars to subprime borrowers to make their monthly mortgage payments, its recent decision to lower the FHA's annual mortgage insurance premiums by 0.25% is essentially the same thing since tax payers are still on the hook for the same risk but receiving lower premiums in return.  Per Bloomberg:

The FHA doesn’t make mortgages. It sells insurance, paid by borrowers, on loans protecting investors in case of default. The program allows borrowers to get a mortgage with a down payment of as little as 3.5 percent and a credit score of as low as 580, on a scale of 300 to 850. That makes it one of the most forgiving mortgage programs and popular among first-time home buyers.

 

Some in the real-estate industry have been calling for another fee cut and heralded Monday’s move.

 

“Dropping mortgage insurance premiums today will mean a whole lot more responsible borrowers are suddenly eligible to purchase a home through FHA,” William Brown, president of the National Association of Realtors, said in a statement.

 

The FHA last cut premiums two years ago. That cut, which came as rates dropped and lowered the annual fee for most borrowers to 0.85 percent from 1.35 percent, led to a wave of refinances.

We vaguely remember something like this happening about 8 years ago and, while we'll have to check our files, our recollection is that it didn't work out all that nicely. 

Of course, the move was intended to offset the recent ~60bps rise in average 30-year mortgage rates...because we simply can't sit idly by while markets attempt to actually work.

Mortgage Rates

 

The private mortgage insurers, who have to compete with federally subsidized rates, shed about 5% of their market cap on the news.

PMI

 

Meanwhile, at least one Congressman, representative Jeb Hensarling of Texas, noted to Bloomberg that the Obama administration's last minute parting gift to the U.S. taxpayer put them at "greater risk of footing the bill for yet another bailout."

Representative Jeb Hensarling of Texas, chairman of the House Financial Services Committee, called the fee reduction “irresponsible.”

 

“It seems the Obama administration’s parting gift to hardworking taxpayers is to put them at greater risk of footing the bill for yet another bailout,” Hensarling said.

But we wouldn't worry too much, the FHA only required a $1.7 billion taxpayer bailout last time around...no big deal really.

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The Saint's picture
The Saint (not verified) 1980XLS Jan 10, 2017 5:39 PM

ZH, put up an Obama countdown clock!

 

evoila's picture

what a farce quote. "responsible homeowners" don't need this crap.

But whatever, what Obama can do, Trump can undo. That's the thing with executive orders.

Shemp 4 Victory's picture

Just another daily outrage, all a part of Obama's Burning All Bridges farewell tour.

Life of Illusion's picture

Obummer's housing financial executive order terrorism 

Antifaschistische's picture

 "gift to the U.S. taxpayer"

Most taxpayers are light complected.....goal ----- accomplished.

philipat's picture

"True colors shining through"? Obuttboy has shown himself to be a petulant, narcissistic, vindictive Libtard schoolboy who cares more about his own short-term political expediency than the interests and security of the American people. Sounds like a good legacy?

south40_dreams's picture

Sounds quite niggerish...so yes

waspwench's picture

Obama is working harder now than he has worked in the entire past 8 years. His goal: to do as much damage to the country as is humanly possible before he is out of office.

Has any other departing president ever tried so shamelessly to cause problems for his successor? Obama is a disgrace and an embarrassment.

No Time for Fishing's picture

This is the type of Obama move that is politically difficult to undo. Reverse this decision and the Democrats and their MSM Propaganda Machine will tar and feather him as hating the middle class and it this one would work.

Raffie's picture

We all knew Obamturd wants to crash the markets on President Trump on Jan 20.

jcaz's picture

One more task for Trump to undo- Chalky is throwing all the landmines he can out the window.....

BabaLooey's picture

Good thing this cunt wasn't as busy as this his first 7.90 years installed.

The cunt should have played 1,000 more rounds of guelf.

 

Countrybunkererd's picture

and when he was busy it was all EO's to easily remove.  Who am i kidding, he was NEVER busy.

Sudden Debt's picture

BLOW BLOW BLOW THAT HOUSE!!!

 

That fucker really wants to destroy America :)

How funny is that :) :)

A president who hates America that much that he's willing to destroy it just because his comRAT didn't fake the elections enough....

crazzziecanuck's picture

Just watch.  In two months, or whenever this blows, they'll try to pin the problem on Putin.

"Putin tricked us!"

We should just fire everyone in Congress and just let Putin run the show.  He can't do a worse job and we've seen from all this "evidence", he's been doing a fairly good job trying to keep a lid on things.

s2man's picture

More likely, they will blame it on Trump.

DeaconPews's picture

they blamed the first subprime morgage meltdown on GW even though it all started under Clinton.

Antifaschistische's picture

Speaking of Putin handing the presidency to Trump...

....I have yet to see the MSM drag a single human out of their cesspool who admits that they WERE going to vote for Hillary until wikileaks came along.

Hillary supporters never cared one bit about her rampant corruption or the corruption of her campaign, or the trail of death she left behind her, and the pollsters (who we know are also run by KGB insiders) never showed that those wikileak revelations made a dent in Hillary's popularity.

NAV's picture

Government power has overtaken Americans’ economic affairs, forcing a majority of freedom loving Americans down “the road to serfdom.”

Only a few weeks back, ZH reported that “taxpayers could be on the hook for $137BN of student loans to be forgiven over the coming years as a result of Obama's executive actions on ‘income-driven repayment’ (IDR) plans.”

http://www.zerohedge.com/news/2016-11-30/obama-student-loan-foregiveness-cost-taxpayers-137-billion-gao-finds

“What F.A. Hayek saw, and what most all his contemporaries missed, was that every step away from the free market and toward government planning represented a compromise of human freedom generally and a step toward a form of dictatorship--and this is true in all times and places. He demonstrated this against every claim that government control was really only a means of increasing social well-being. Hayek said that government planning would make society less livable, more brutal, more despotic. Socialism in all its forms is contrary to freedom.   Taken from the description written for the Definitive Edition of Road to Serfdom

George Soros is implementing his socialist global agenda in part through his puppet,  Alinskyite Community Organizer Barack Obama.

HRH Feant's picture
HRH Feant (not verified) NAV Jan 10, 2017 6:31 PM

Which is why I hate fucking communists.

demi urge's picture

All the people paying MIP were still paying MIP.

Are you really going to lay the blame at the feet of the FHA borrowers who accepted the terms of the deal that was offered?

The same people who ultimately were fucked by Big Finance as BF created a system they knew (and were betting on) to fail?

And after it all, us taxpayers who were already paying MIP, ALSO are on the hook for the bailout as taxpayers, essentially being double jeapoardized?

Pfffffft.

Countrybunkererd's picture

just make it all free, everything, crash it, debt jubilee it and restart.  Rip off the bandaid, nevermind the infected deadly wound underneath, and start again.  The patient will die either way.

HRH Feant's picture
HRH Feant (not verified) Countrybunkererd Jan 10, 2017 5:29 PM

Time for Trump to tell the US Treasury to print that $20 trillion-dollar coin. In platinum.

Countrybunkererd's picture

why not, give these asshats some ownership since they will pull every stop at ensuring Trump takes the fall.  The new currency is Odumbo's and rainbow colored to show our understanding of what he really cared about. 

Northern Lights's picture

Minted with Obamas face on it.

HRH Feant's picture
HRH Feant (not verified) Northern Lights Jan 10, 2017 5:44 PM

I love the idea!

AliSONY's picture
AliSONY (not verified) Jan 10, 2017 5:27 PM

Yeah that's it, give more man's to people who can't pay them. Moronic. 

svs9000's picture

WAVE GOODBYE OBAMA! 

One more thing for Trump to undo...

Countrybunkererd's picture

He's making a list, checking it twice, gonna find a way to remove a legacy

Barrock's picture

Yea, what is 1.7B dollars when just the federal deficit for 2016 was $587B?  http://www.usgovernmentspending.com/federal_deficit_chart.html

 

Countrybunkererd's picture

1,700,000,000 here and 1,700,000,000 there... pretty soon ahh you will never get it with a comment like that.  Go to WAPO.

Northern Lights's picture

FREE MONEY BITCHES!!!!!

Get it before the offer expires on Jan 20, 2017.

Northern Lights's picture

I'd like to nickname Obama "Crispy" from now on.

Txpl9421's picture

These "responsible borrowers" have credit scores of 580.

That sentence is contradictory.

demi urge's picture

Not necessarily.

You can have a credit score of 750 (as I did when I bought my house at 26), but if you're early in your career and you don't have 40 grand for a down payment, you're paying PMI.

 

 

scoutshonor's picture

I picture Obama in the basement of the white house with an orange stapler.  That guy.

SHADEWELL's picture

Cunt puppet
Like a trained gash on a leach

Financial industry to the brown cunt

"Dance for us you piece of shit dance dance DANCE!

chosen's picture

Oh well, just another mulatto executive order for Trump to overturn.

Kirk2NCC1701's picture

I'm pissed that the rate increase does not make our Refi worthwhile, as the Breakeven point is too far out to bother.

We bought with 20% Down, then watched our paper Equity rise to 35% in 2 years. We were looking to refi a few months ago (from 30 yr Fixed at 4.375%, to a 15/1 ARM at 2.75%), so we could plow the savings in Interest payments right back into accelerated payments. Damn that Mr. Yellen cunt*!

* With profound apologies to cunts, who are actually very useful and necessary.

DivisionBell's picture

I had one of those 30yr fixed FHA loans due to the low down payment requirements and paid PMI for 5 years.  Refinanced in late 2016 now at 60% LTV to a 15-yr 2.75% fixed and closed before they could hike rates.  Expect to actually pay it off in 10yrs or less with extra principal on each payment.

MASTER OF UNIVERSE's picture

Obama can issue an executive order to force banks to issue more subprime because everyone is issuing fake numbers & news now that everyone else knows that the whole system of Economics imploded long ago. The Central Banks issue Fake News in terms of proposed rate hikes, and the unemployment numbers are not counted anymore. They are not estimated accurately either. All market activity that occurs now is activity that is propped up via money that does not come from the bottom tier socioeconomically.

directaction's picture

More thinly disguised reparations for slavery. 

sinbad2's picture

3.5% equity?

Because most Americans are broke, they don't spend enough to stimulate the economy.

So they lend money to people, so they will spend and stimulate the economy. Now just because these people cannot afford the repayments, is irrelevant, no point worrrying about the future, it's at least a month before they default.

Only in America.

besnook's picture

this is a gift to the banks, not the people buying homes. the banks don't care about defaults. they only care about generating money out of thin air with the attending fees for stting up the legerdemain(pun intended) and the sale of the paper.

CHoward's picture

No more vacations for you Barry - they give you way too much time to think stupid shit up!  Oh - what's that?  You're kidding!  No more vacations?!?  HAHAHAHAHAHA