In Trump's first term in 2020 during COVID he initiated the FHA in short it allowed mortgage borrowers to say they can't make their repayment enabling the government to front the money for them this only ended in September this year that means for the last 5 years people could effectively not pay their mortgage the consequence of this policy ending is a steady increase in foreclosures this FHA policy alone are enough to tank the US economy and cause another housing crash Biden also wanted to make FHA permanent before leaving office btw
>>61342909>FHA mortgages, which make up less than 15% of all active home loans, but allow higher debt ratios and smaller down payments than other loans, accounted for 90% of the 131,000 home loans that went delinquent last year>The COVID relief program allows FHA to make payments, called partial claims, (‘partial’ because the payment is not covering the entire debt) on behalf of delinquent borrowers, and add the amount fronted by the government to the back end of the loan, interest free. The FHA payments on behalf of borrowers cannot exceed 30% of a loan’s unpaid principal balance.>“Consider a borrower who misses five $4,000 monthly mortgage payments,” says the WSJ editorial. “The servicer will add the $20,000 in missed payments to the mortgage and reduce monthly payments by $1,000 for three years—adding another $36,000 to their mortgage. So the borrower is $56,000 deeper in debt, though with no additional interest.”>Mortgage expert John Comiskey projects the FHA “made ~2.6 billion dollars in mortgage payments from these stand alone partial claims last year.” Records analyzed by Comiskey indicate some borrowers made no payments for several years, with the FHA stepping in to bring their loans current every three to four months.>Comiskey, who calls the effort “an abject FHA loss mitigation policy failure,” tweeted last month that about 70% of some 160,000 FHA Covid relief modifications originated during the past two years are delinquent, and about 55% are seriously delinquent.
>>61342934>As of September 2024, FHA held active mortgage insurance on 7.81 million single family mortgage loans. >Loan servicers receive a monetary incentive for participating in the relief program – between $500 and $1,750 every time the FHA steps up on behalf of borrowers.>“The FHA made 556,841 ‘incentive payments’ to servicers over the past year to prevent foreclosures—nearly as many as the new mortgages it insured,” says the WSJ editorial. “Government-backed mortgage relief has become a cash cow for servicers, some of which originated the risky loans they are paid not to foreclose.
