FHA Loans Take The Worry Out Of Mortgages

by Peter G. Miller
July 26th, 2007

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There was an interesting, if somewhat bleak, op-ed piece in the New York Times that makes interesting reading,

According to Joshua Rosner, “The subprime crisis has not been averted. In fact, it is still largely ahead of us. The downgrades represent only a small fraction — about 2 percent of the mortgage-backed securities rated for the year between the fourth quarters of 2005 and 2006 — of what the rating agencies suggest could be a mountain of bad debt held by investors, including pension plans, banks and insurance companies. The agencies are primarily downgrading assets with expected losses that are already working their way through the pipeline. They are not projecting future losses.

“Nor do the downgrades apply only to lower-rated securities. Some even relate to the performance of debts that are rated AAA, meaning the agencies judged them to be of the best quality — bulletproof.” (See: Stopping the Subprime Crisis, July 25, 2007)

A big issue for Rosner is that ratings agencies did not downgrade mortgage-backed securities before. In a world awash with toxic loans and their inevitable results you have to wonder how trained analysts could miss such a massive and obvious problem.

Meanwhile, back in the comfy confines of the FHA world, life goes on without teaser rates or stated-income loan applications. How dull. How safe — for both investors and borrowers.

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