The NAR’s stated goal is to boost home sales by 15–20 percent. This goal is self-serving because the association’s members would earn a commission on these additional sales. But what about the working class families with a FICO score of 620, 640, or even 660 who would get one of these FHA loans under the NAR’s proposal? Is this sensible lending or a return to unsustainable lending?

One needs look no further than the NAR’s own example—the credit characteristics of the applicants who have been denied an FHA loan. These families would suffer an estimated 16.4 foreclosures per 100 loans—nearly three times the rate for today’s FHA borrowers.[5] Families in working-class neighborhoods would suffer from even higher foreclosure rates. The winner would be the NAR and the losers the families it wants to set up for failure.

Characteristics of FHA applicants for a home purchase loan (April 2013): [6]

Closed loans               Denied applications

Average FICO score:                                      697                              668

Average loan-to-value (LTV) ratio:                95%                             96%

Average debt-to-income (DTI) ratio:              40%                             46%

An estimated 5.8 foreclosures per 100 for borrower characteristics similar to today’s closed loans:[7]

FICO score range:                                           680–719                               

Average LTV ratio:                                         95%                           

Average DTI ratio:                                          36–40.9%

An estimated 16.4 foreclosures per 100 for applicant characteristics similar to ones suggested by the NAR:

FICO score range:                                           620–679                               

Average LTV ratio:                                         96%                           

Average DTI ratio:                                          41–50.9%

Rather than sensible lending standards, the NAR’s proposal would continue the Nightmare at FHA by expanding lending to families who cannot afford to repay their loans.

Please see the “End the Nightmare at FHA” section below for common-sense steps the NAR should support to ensure sustainable FHA loans to working-class home buyers and neighborhoods. These include best-practice underwriting standards long utilized by the VA such as a residual income tests, appraiser panels, and lender risk sharing.

Spotlight on Insolvency

FHA’s Estimated GAAP Net Worth Equals –$27.36 Billion, with a Capital Shortfall of $47–67 Billion

Since the last issue of FHA Watch, the FHA has submitted overdue reports to Congress for September 30, 2012, and December 31, 2012. These reports contain data regarding FHA’s financial condition since the release of the FY2012 Actuarial Report last November. These data have necessitated revised solvency calculations from October 2012 onward. The Denial Dial and table A1 have been revised accordingly.

This month, the FHA’s private generally accepted accounting principles (GAAP) estimated net worth improved slightly. The estimate for April of the FHA’s GAAP net worth is –$27.36 billion, up from –$28.79 billion (adjusted) and –$30.41 billion in March 2013 and September 2012, respectively, and down from –$20.87 billion in September 2011. The capital shortfall stands at $47 billion (using a 2 percent capital ratio) and $67 billion (using a 4 percent capital ratio). The Denial Dial was reset to −2.48 percent.

Please see the notes to table A1 for a detailed explanation.

Spotlight on Delinquency

Overall Rate Declines to 14.68 Percent

In March, 14.68 percent of all FHA loans were delinquent, down from 15.21 percent in March 2013 and from 15.97 percent in April 2012. Total delinquencies decreased by 40,000 over March 2013 and by 58,000 over April 2012.

For the third consecutive month, each delinquency category saw declines in both rate and number and are at their lowest levels since the fall of 2011. Yet, one in seven FHA families remains delinquent.

The serious delinquency rate decreased to 8.73 percent from 9.03 percent in February 2013 and 9.42 percent in April 2012.

For the monthly data tabulation, see table A2 in the appendix.

Spotlight on Best Price Execution

FHA, VA, and USDA’s Pricing Dominance Increase

Table 1 demonstrates the pricing advantages the Ginnie/FHA, Ginnie/USDA, and Ginnie/VA divisions have over Fannie Mae.

Compared to last month, the Ginnie Mae mortgage-backed securities (MBS) execution deteriorated compared to the Fannie MBS execution by a third of a point, or about $515 in price, reversing Ginnie’s gain in April. FHA continues to crowd out private mortgage insurers on medium-risk loans with 700–720 FICO scores and 5–10 percent down payments (Loans D–F) through weaker underwriting. This is evidenced by the fact that the FHA’s average FICO score on purchase loans it insures is 695.

Table 1. Best Price Execution (Ginnie pricing advantages in bold)

For a larger view click on the table.

Source: Adapted from JPMorgan’s2012 Securitized Products Outlook, November 23, 2011, 18.

Note: Mortgage-backed securities (MBS) pricing from MBS Live, published by Mortgage News Daily. Comparison based on MBS pricing as of May 17, 2013. On that date, a Ginnie 30-year MBS with a coupon of 3.0 percent had a price of 103.97, and a Fannie 30-year MBS with the same 3.0 percent coupon had a price of 102.53. These prices were then adjusted based on the present value (where necessary) of applicable borrower-paid credit fees, mortgage insurance premiums, and the value of the base servicing fee. Fannie’s guarantee fee was increased by 10 basis points effective April 2012, as mandated by Congress, and by 10 basis points again as announced on August 31, 2012, by the Federal Housing Finance Agency. All publicly announced FHA premium increases are included. USDA and VA premiums are unchanged.

Each of the Government Mortgage Complex’s five divisions (Freddie Mac is the fifth) has substantial pricing and underwriting advantages over the private sector. The result is that the Government Mortgage Complex’s share of the entire first-mortgage market continues to remain near 90 percent.

These scandals even without the cover ups have resulted in a loss of trust with the government and numerous agencies. A new climate exists in Washington.

During the Watergate hearings the Republicans along with the Democrats sought to unseat Nixon a Republican President. This was a bipartisan effort. Today to explain the scandals, many influential Democrats have created a narrative that the IRS scandal is the fault of the Supreme Court, and that the Benghazi scandal is the Republican’s fault claiming they resisted the allocation of more money to the State Department for security which the State Department representative under oath stated was not the case. Both narratives have been proven false.

What America is experiencing today is much greater than what happened during Watergate. The problem is systemic. Agencies involved in this trifecta of scandals include: the Department of State, CIA, FBI, IRS, Department of the Treasury, Justice Department and White House staff. What remains to be seen is if Obama’s campaign was in anyway involved in any of these scandals.

For a larger view click on the image.

Big government demands more power and money to grow. It is not enough to investigate, some say it is time to cull. Members of Congress noted this not a leak it is a tsunami of corruption. Like a huge wave it has no conscience nor regrets as it wreaks havoc among the people.

This situation cannot be ascribed to a single incident and may have been building over a number of years. However the attack rhetoric from the White House and President Obama over the last four plus years has undoubtedly exacerbated incivility which has created a climate among various people and leaders in our agencies and White House to do things which have seriously damaged the integrity of the government. A republic cannot survive without the trust of the people.

It all comes down to the loss of trust.

The IRS action and the coverup is a serious abuse of power and a blow to our democracy. The cover up undoubtedly assisted Obama in his reelection bid in 2012. Any coverup by government officials is a serious matter. However if it is also done to manipulate an election it is even more egregious. The foundation of a democracy is trust.

On Friday J. Russell George, the Treasury Department’s top tax watchdog, said he had informed top Treasury officials starting last spring about problems related to the special attention the agency was paying some conservative organizations seeking tax-exempt status. George said he shared the information with the Treasury’s general counsel in June and with Deputy Treasury Secretary Neal S. Wolin “shortly thereafter.”

When Obama was asked by a reporter whether anyone in the White House knew the IRS was targeting conservative groups Obama failed to answer the question. It is not credible to believe that both the Secretary of the Treasury and President Obama were not informed of the situation. The coverup undoubtedly was politically inspired right before the election and allowed the IRS abuse to continue up to and including the election and beyond.

This is not a Democrat or Republican issue; it is an American issue. It strikes at the heart of our republican form of government. The coverup and its proximity to the election affects the integrity of the 2012 election, and our entire election process.

READ MORE: http://www.washingtonpost.com/politics/house-panel-opens-hearing-on-irs-targeting-of-conservative-groups/2013/05/17/f1d7d352-beea-11e2-97d4-a479289a31f9_story.html?hpid=z1

Representative Tom Rooney (R – FL District 17)

Representative Tom Rooney (R – FL District 17) has now become the eleventh member of the Florida delegation to co-sponsor the Fair Tax Act (HR-25/S-13). Rep. Rooney represents South Central Florida including most of Hardee, Desoto, Highlands, Okeechobee and St. Lucie Counties. He sits is on the House Appropriations committee. A full list of House sponsors may be viewed by clicking here. Senator Saxby Chambliss (R-GA) is the sponsor of S-13 in the US Senate. Senate sponsors may be viewed here.

The IRS scandal has renewed interest in HR-25.

The Fair Tax Act is introduced, “To promote freedom, fairness, and economic opportunity by repealing the income tax and other taxes, abolishing the Internal Revenue Service, and enacting a national sales tax to be administered primarily by the States.” The Fair Tax Act states:

SEC. 2. CONGRESSIONAL FINDINGS.

2 (a) FINDINGS RELATING TO FEDERAL INCOME

3 TAX.—Congress finds the Federal income tax—

(1) retards economic growth and has reduced the standard of living of the American public;
(2) impedes the international competitiveness of 7 United States industry;
(3) reduces savings and investment in the United States by taxing income multiple times;
(4) slows the capital formation necessary for real wages to steadily increase;
(5) lowers productivity;
(6) imposes unacceptable and unnecessary administrative and compliance costs on individual and business taxpayers;
(7) is unfair and inequitable;
(8) unnecessarily intrudes upon the privacy and civil rights of United States citizens;
(9) hides the true cost of government by embedding taxes in the costs of everything Americans buy;
(10) is not being complied with at satisfactory levels and therefore raises the tax burden on law abiding citizens; and
(11) impedes upward social mobility.

Members of both major political parties have stated that the IRS is a threat to freedom, fairness and economic opportunity. However, none have suggested the elimination of the 90,000 employee strong IRS. Many have voiced concerned that the IRS will expand its powers by being a key part of the implementation of the Affordable Healthcare Act, which is a national tax according to a recent US Supreme Court decision.

Rep. Vern Buchanan (FL-District 13) addresses the Congressional investigation:

Rep. Buchanan sits on the House Ways and Means Committee. He has not signed on as a co-sponsor of HR-25.

Disclaimer: The author sits on the Board of Directors of Fair Tax – Florida.

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The stated goal of the progressives is first to register, and then confiscate, the firearms of law abiding citizens.  They are taking advantage of pleas to “do something” to stop the horrific crimes seen recently in Newtown and Aurora, but it appears, at least for the time being, nothing will be accomplished. Recent studies by Pew and the government show gun ownership increasing and gun homicide and violence decreasing since the peak in 1993.

The Manchin-Toomey gun amendment failed to pass the Senate, with 54 Senators in favor of the bill and 46 against.  The bill required 60 votes to move forward.  We are too close to the 2014 elections, and no one wants to deal with the blowback from their constituents if they vote to infringe on any of the rights of Americans to keep and bear arms.

This past week, vendors using the Square Account mobile phone application, which processes credit and debit card transactions, received an updated user agreement dated May 9^th, 2013.  In this agreement, Part One, Section 6, states:

“By creating a Square Account, you also confirm that you will not accept payments in connection with the following businesses or business activities: [this section has been modified to add item number] “(23) sales of (i) firearms, firearm parts or hardware, and ammunition; or (ii) weapons and other devices designed to cause physical injury.” 

It stands to reason the credit card companies and banks will follow. How many gun show vendors use Square to process their sales transactions? How soon will banks and credit card companies follow suit?

Is this merely a conscientious decision by the owners of Square to not accept transactions involving firearms or other weapons, or is this a result of collusion with anti-Second Amendment officials in our government to “infringe” on our Second Amendment rights and circumventing Congressional legislation?

The federal health law derided as a “job-killer” by critics will create an estimated 9,000 jobs in 14 states this summer to handle consumer inquiries about new online insurance marketplaces.

The jobs are through Vangent, a General Dynamics subsidiary, which was awarded a $530 million one-year contract by the federal government to set up call centers to answer inquiries (sic) related to the insurance marketplaces in 34 states where they will be run in whole or part by the federal government. Other states will run their own marketplaces with their own call centers.

“And these few thousand government-created, taxpayer-funded jobs don’t make up for the workers at the Circle K Southeast convenience store chain who will be pushed into part-time work because of the health care law. [via Free Beacon] Nor does it make up for those workers in local government, higher education, restaurants, a movie theater chain, and in other firms who will also see their hours pared back,” notes Hackbarth.

Read the full column here.

“The Internet sales tax is a terrible idea that will crush small businesses with the new burden of having to collect taxes from their out-of-state consumers. The Internet sales tax is nothing more than a money grab by tax-hungry state and local governments that are desperate for more revenue because they refuse to cut spending.

“As far as job-killing taxes go, the Internet sales tax is the worst kind because, rather than only take the hard-earned money of small businesses, it imposes more complications and burdens for businesses to comply with.

“To illustrate how bad an idea this Internet sales tax is, if it ever becomes law, it will force businesses in Florida to collect sales taxes imposed by over 9,000 jurisdictions throughout the U.S. That means companies will be forced to spend more time and money figuring all of this out and making sure they send the right amount to each state and municipality where their consumers reside. The more companies are burdened with new mandates like this, the less time and money they have to grow their businesses and create new jobs.”

For information on the Internet sales tax laws for each state, see NOLO’s Internet Sales Tax: A 50-State Guide to State Laws.

NOLO states, “The current default rule throughout the United States is that you must collect sales tax on Internet sales to customers in those states where your business has a “physical presence.” The physical-presence rule is based on a 1992 United States Supreme Court decision, Quill Corp. v. North Dakota, that addressed the obligations of mail-order businesses to collect sales tax on out-of-state sales. The decision has been extended to include online retailers.”

NOLO reports in its column “Florida Internet Sales Tax“, “A more specific statement of what counts as physical presence under Florida law can be found among the various definitions of “dealer” (meaning a person or entity required to pay sales tax) in Section 212.06 of Florida’s sales and use tax law. More particularly, a ‘dealer’ under this law includes ‘any person . . . who maintains or has within [Florida], directly or by a subsidiary, an office, distributing house, salesroom, or house, warehouse, or other place of business’.”

Senator Nancy Detert, R-FL District 28.

Senator Nancy Detert, Florida District 28, introduced SB 0316: Taxes. SB 0316 states:

Taxes; Reducing the tax rate applied to the sale of communications services; reducing the tax rate applied to retail sales of direct-to-home satellite services; revising the term “mail order sale” to specifically include sales of tangible personal property ordered through the Internet; providing that certain persons who make mail order sales and who have a nexus with this state are subject to this state’s power to levy and collect the sales and use tax when they engage in certain enumerated activities, etc.

NOLO notes that in 2012:

“The Florida legislature recently considered amending the state’s legal definition of a mail-order sale so that Internet “dealers” who do not have a physical presence in the state would nonetheless have to pay Florida sales tax. Laws of this sort have been considered in various forms in various states. They are sometimes referred to as “Amazon laws.”

[ ... ]

More particularly, earlier this year the Florida legislature considered amending the state’s sales and use tax law to require out-of-state “dealers” without a physical presence in Florida, but with so-called “click-through” arrangements with persons in Florida, to nonetheless collect sales tax. Such a dealer would need to collect sales tax from Florida customers if that dealer:

• had an agreement with one or more Florida residents to direct potential buyers to the dealer via a website link
• compensated the Florida residents for directing potential buyers to the online dealer, and
• the dealer’s “cumulative gross receipts” from such directed sales to Florida customers exceeded $10,000 within the preceding 12 months

However, the proposed legislation was never enacted. It remains unclear whether similar legislation will be re-introduced in the future.

We know that Senator Detert did introduce this legislation during the 2013 session.

Final Words from NOLO:

The issue of whether to require online retailers to collect sales tax in a state where they have no physical presence has been a matter of ongoing debate. At this time, however, Florida has not enacted any law that would require such retailers to collect sales tax from Florida customers.

In Florida, the physical-presence rule continues to apply for Internet retailers. However, because the issue remains contentious, you should consider checking in periodically with the Florida Department of Revenue to see if the rules have changed. Also, for more general information on taxes on Internet sales, see Nolo’s article Sales Tax on the Internet.

McRay argues that AARP is a nonprofit organization with a membership that helps people 50+ years of age – have independence, choice and control in ways that are beneficial and affordable to them and society as a whole. McRay argues that utility costs comprise a substantial portion of their housing expenses – that the burden can be severe – that even people who own their homes outright may pay over half their limited income for housing – due in large part to the high cost of utilities. Inability to pay utilities ranks as the second most common cause for eviction after inability to pay rent.

AARP is appealing to the Court to ensure that the Commission follows the law in setting residential utility rates that are fair, just, and reasonable. The Commission approved a non-unanimous settlement in the FPL case – contrary to Florida law – because it failed to make findings based upon competent, substantial evidence on the record as a whole to address the objections raised by OPC – representing the interests of residential ratepayers. Moreover, the Commission approval of the settlement includes new matters that should not be included in the rate case because no public notice of them was provided as required.

In her weekly Wall Street Journal column Peggy Noonan wrote of “Obama fatigue” while ruminating on the opening of the George W. Bush library.

She noted that Bush’s popularity in the polls—in “a 50-50 nation”—was equal to President Obama’s; now at 47%. I’m betting we shall see Obama’s numbers continue to fall in the months and years ahead. Noonan put her finger on the cause. We are all weary and wary of Obama. And he is not even half-way into the first year of his second term.

Usually by a second term, a President has mastered the skills the job requires, but Obama not only arrived with the thinnest resume of any previous President, but he demonstrated his indifference to working with Congress and his contempt of the Supreme Court, referring to the latter as “unelected” when even school children knows they are appointees.

He left Congress to be manipulated by Harry Reid and Nancy Pelosi. By the 2010 midterm elections, he had lost control of the House. By the start of his second term, even members of his own party in the Senate were refusing to cooperate.

In the first term Obama seemed to be everywhere including late night shows like David Letterman’s and daytime shows like “The View.” The mainstream media’s infatuation with him ensured that he was on magazine covers and, as President, he receiving front page headline news coverage. Less coverage, indeed, biased coverage, was given the turnout of an estimated million or more citizens to protest against the passage of Obamacare.

It has been Obamacare, his “signature” legislation that has greatly contributed to the disaffection that now follows the President wherever he goes. Many states refused to set up the exchanges required while others passed resolutions against its implementation. People began to discover that their premiums increased dramatically and, for some, their jobs either disappeared or were downgraded to part-time. Obamacare continues to contribute to the high rate of unemployed Americans nationwide.

The opening of the Bush library was a reminder of the thousand times Obama blamed Bush for all the ills he “inherited” upon taking office, but all Presidents encounter this problem and none spent their entire first term blaming their predecessor. It was a mark of Obama’s immaturity.

All Presidents encounter some kind of scandal in the course of their administration, but Obama seems to have had more of his fair share. “Fast and Furious” was covered up with an executive order and outright stonewalling. It involved a government-sponsored gun-running scheme to Mexican drug cartels with the intention of “tracking” the weapons. This is as hair-brained as it gets, but some of those weapons ended up killing a U.S. Border Patrol agent and many Mexican victims. Any other President would have been severely wounded, but the mainstream media managed to ignore it sufficiently until it went away.

This same process ensued following the September 12, 2012 attack in Benghazi, Libya that killed a U.S. ambassador and three security personnel. So far, everyone in the Obama administration who was involved in the failure to initially provide sufficient protection and then, while the attack ensued for several hours, failed to come to their aid, has been given a pass by the media with the notable exception of Fox News.

I sometimes think that too many Americans are afflicted with Attention Deficit Disorder because scandals and repeated lies do not seem to be remembered for more than a week or so. In a society afflicted by a suffering economy, the immediate needs of one’s personal life overtake and blur concerns for the constant revelations regarding a succession of failure policies.

The calls for the approval of the Keystone XL pipeline, a project that would not cost the taxpayers a dime while at the same time generating tens of thousands of jobs, go unheeded despite repeated studies that confirm it not only wouldn’t pose an environmental hazard, it would contribute to the nation’s energy independence.

At the same time, Obama’s self-proclaimed war on coal is causing coal-fired plants providing electricity to shut down. At the same time, in Europe, “clean energy” projects—primarily wind power—are seeing their government subsidies end while new coal-fired plants are authorized and built.

The “new normal” in America is a $17 trillion national debt that exceeds our current gross domestic product earnings of just over $15 trillion. Under Obama, the government has run up a huge debt that has led to its credit rating being reduced for the first time in the nation’s history.

These and other factors contribute to the “Obama fatigue” to which Peggy Noonan alluded. Even the lavish lifestyle of the Obama’s no longer is sufficient to evoke anything other than a mild rebuke.

This is likely to change, however, as voters begin to focus on the 2014 midterm elections because the Rasmussen polls are telling us that the economy is their primarily concern. Fully 80% of likely voters surveyed last week said the economy will strongly influence how they vote. Just 17% of adult consumers rated the economy as good.

We well may see more Democrat incumbents decide not to run in 2014, opening the door for Republican candidates. A Republican-controlled Congress, such as occurred during Clinton’s first term in 1994 may be the result.

Obama will try to blame Republicans for the failure of his gun control and immigration initiatives and many pundits are saying this is part of his 2014 strategy. It won’t work. His effort to frighten and burden Americans with sequestration has already failed, further weakening his credibility.

In general Americans have seen and experienced enough of Barack Obama to conclude that they no longer want to hear or see that much of him in the months and years ahead.

© Alan Caruba, 2013