Signs like the one pictured have been sprouting on parkways all over Rogers Park and Edgewater. Looks like we're setting up for another wave of foreclosures after the one just in front of us plays itself out.
If recent FHA loan generations and current FHA delinquencies and defaults can be seen as indications of where the housing market is headed, we can expect another costly home-loan bailout in a couple of more years, in addition to our current soaring default rate and the tottering $3.5 trillion tower of shaky commercial debt. Delinquency rates for recently-generated FHA loans are at 14%.
2nd Quarter Notices of Defaults were the highest ever recorded, and these were for loans that actually defaulted 6 to 9 months before the NODs were issued. Lenders have so large a backlog of delinquencies that many borrowers are in default a year or more before any action is taken against them.
The $8000 tax credit is just about to end, coinciding with the end of the selling season, and we will then see how durable the recent hike in housing sales really is. But it looks from here like the taxpayers will be paying for this recent uptick two ways, first with the $8000 taxpayer subsidy for new home buyers, and then again when these subsidized-down-pay loans start to default. Given that about 80% of all home loans being written now are FHA-guaranteed, that could mean another record-setting wave of defaults and foreclosures.
The Feds always were the most irresponsible lenders of all, inasmuch as the wave of bad lending was made possible by the alphabet soup of government agencies- HUD, GNMA,FNMA, FHA-that either backed or bought the mindboggling array of "creative" loans that got us into our current financial predicament. Now the FHA is THE irresponsible lender, and just about the only functioning home lender.