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Thursday, December 03, 2009

FHA Head: We're Not the Next "Subprime"

FHA Head Shaun Donovan says that FHA-backed loans are not the next "suprime."

“Subprime delinquencies are 240 percent higher than FHA’s for a reason,” Donovan said. “While others participated in investor-owned markets or were exposed to exotic mortgages … FHA stuck to the basics during the housing boom: 30-year, fixed rate traditional loan products with standard underwriting requirements.”

Except, of course for that pesky 3.5% down payment minimum vs. traditional minimums of 20%. This, from an agency that holds a 0.53 reserve level, even though it is required by Congress to hold a level of 2% (which is still well below traditional banks). And why shouldn't we believe Mr. Donovan? Like 92% of all Obama appointees, Donovan spent his entire career in government, but he has a Harvard degree, so he is obviously knowledgeable about private markets...