Do You Remember FHA-235's?

By
Real Estate Agent with Prudential Towne Realty

I remember buying my first house back in the late 80's. We didn't qualify for a conventional loan however, we purchased a home that was under the FHA-235 program. The house payments were based on income allowing more families who otherwise could not purchase a home, to do so. I felt so lucky because it was a major stepping stone to selling and purchasing my "dream home".

This program has disappeared but WOW! Wouldn't it be nice to have it back now?

Because of lenders tightening up qualifications etc. fewer people are qualifying and when they do, I'm finding they qualify for much less!

I think this could possibly stimulate the housing market even more! What do you think?

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Anonymous #9
Anonymous
Jim

I remeber working 8- hours a week to pay for my house and pay me taxes. My neighbors that had FHA 236 loans were partying all night. I got about 2 to 3 hours of sleep a night. I helped pay for their houses.  I will NEVER forget this. Thanks.

April 05, 2009 03:43 PM
Anonymous #10
Anonymous
DJ

When I got divorced the 235 mortgage we had allowed my children to stay in the same home and in a good school district for about the same cost as moving to a small apartment.  I was grateful for that but nervously watched as my subsidy repayment amount grew larger.  My 235 monthly payment covered the principle and a portion of the interest amount, with the subsidy covering the balance of the interest due. 80's interest rates were high and I could not qualify for refinancing at that time. Instead, I squeezed out every dollar I could to make home improvements; adding a garage, siding, gutters, new windows, new roof, a/c - not partying.  My understanding was that value increasing home improvements would help decrease the subsidy repayment amount due, when I could refinance.

When I was able to qualify for a new mortgage, I couldn't get much information from HUD.  Those I spoke with -- I mean those who would even return my calls - cited unfamiliarity with the older 235 program (I understand changes in the 235 loan program were made after we secured ours in 1981/82) and no one would consider researching repayment information unless I actually secured a financing commitment - tough to get when you don't know the amount you'll need! 

I finally found a mortgage company to help me untangle the mess.  With the government repayment amount required at several thousand dollars more than the original cost of the home, and  with the small principle amount still owing, I ended up with a new mortgage principle of nearly two and a half times the original price of the house -- after making payments for 12 years.  All the improvements I scrimped and saved for had absolutely no affect on what I had to repay the government for the subsidy interest paid.

A significantly lower interest rate makes my current house payment a little more than my previous 235 payment but I have little hope of ever paying off my mortgage.

Based on my experience with "helpful" government loan programs, I say "steer clear"!

May 30, 2009 08:13 PM
Anonymous #11
Anonymous
Brian Rice

The FHA 235 Program was a disaster and was being used in the 60 and 70's primarily as a social ree-ngineering tool to let low income people buy where middle income families were living.  The end result was that middle income communities suddenly became a low iincome community with all the crime that came with it.  Hard working middle class folks were now living next door to people who were on welfare, paying in some cases 1/3 the mortgage they were paying.  The FHA 235 program came very close to being bankrupt because the high rate of foreclosures, even after these people were given all these breaks they were not repaying thier debts.  Small wonder.

Bringing back the old FH 235 program is like asking to bring back the lier loan program of the last ten years that caused this current recession we're now in.  Owning a home is a privilege not a right.

Respectfully yours

 

February 05, 2010 10:21 AM
Anonymous #12
Anonymous
carla patrick

my decesed husband purchased properrty in 1999 and when he closed on the property it was never disclosed that the 235 program was in the previous mortgage.now i have a buyer for the property and find out with the payoff to the bank and the payoff on the 235 program i didnt make enough on the sell of my house to pay off the bank and hud,if anybody can help me please let me know.thanks 

September 13, 2010 02:38 PM
Anonymous #13
Anonymous
Andy

I was in the real estate business and then working the the local Assessor's office during and after the FHA 235 debacle.  The house being built to meet the limits set on price were junk and in some areas created instant slums.  The default rate was sky high and HUD ended up with a monster inventory of those things. For a few people it provided a short time in cheap housing but the overall program was a disaster.

June 23, 2011 02:39 PM
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Information regarding real estate as well as personal quips regarding single grandmotherhood and other off-topics that are humerous or helpful in many ways.