We've seen the damage that comes from the belief that everyone should be a homeowner. Now that the sub-prime market has blown up, aggressive home builders have turned once more to seller-financed down payments. The down payment can be as low as 3%, yet the FHA will take the mortgage. And take the mortgage they do; thus far this year 34% of the loans the FHA has made have been for seller-financed properties. This type of loan has grown tremendously since 2000 when less than 2% of the FHA loans went to seller-financed properties. Maybe it's because the buyer has little money in the deal. For example, one guy bought a $189,000 house with $250 down. Whatever it is that makes this a bad loan for the FHA, the default rate within the first two years is better than 15%.
The seller financing does not necessarily come from the seller. There are 'non-profits' whose primary functioning is providing down payments to buyers. The seller reimburses the non-profit. One of the largest non-profits is Nehemiah Corp. of America, which seems to be a conduit to enrich its founders under the guise of helping people.
1 comment:
Isn't it always the case that an often good idea is corrupted by greed and a thirst for profit. But then, isn't that the hinge pin of capitalism?
Post a Comment