Here are some questions parents should ask themselves when considering joint custody:

Q: How well do you feel you and the other parent can get along?

A: Parents should cooperate with each other. "Support the child’s relationship with both parents," Barbara Nordhaus, assistant clinical professor at the Yale Child Study Center, said Thursday. "Drop-offs and pickups should go smoothly. The better a couple can get along, the easier joint custody will be for the children," said Beth Clark, clinical psychologist and a consultant to the University of Michigan Center for the Family and Child. Leslie de Pietro, coordinator of Family Care Resources at the University of Michigan, agreed. "Children shouldn’t be used a pawns." Parents should meet regularly to discuss the joint custody situation without the children.

The way to recover and thrive after divorce is simple: Until you can release the toxic emotions surrounding your divorce, it is impossible for you to move forward in life and be happy.  It takes enormous commitment and effort but it can be achieved.  If you want to lead a new life that is both fulfilling and happy, you must let go of the negative emotions and thoughts that hold you back from creating a life you love.  And guess what else?  Who do you suppose pays the biggest price when it comes to toxic emotions?  You.

During the divorce process, the negative emotions that you were already experiencing in your marriage go haywire!  During times of crisis, our world appears to crumble and with it our concept of whom we are. Our mind chatter turns up the volume to deafening levels.  We question everything.  We feel emotions so intense that we often wonder if we will survive them.  Anger, sadness, depression, rage, grief, resentment, bitterness, and confusion are some of the feelings we are hit with.  

On October 1st FHA loan limits had been dropped to levels which existed prior to the Economic Stimulus Act of 2008. With this new bill the limits will rise to 125 percent of the area median home price from 115 percent, up to a  maximum $729,750 from $625,500. This extension will last through 2013.

This extension of the FHA loan limits had been pushed hard by the real estate and mortgage industries who felt that many communities would be hurt by reduced lending caused by the lower limits.

Expect a new FHA Mortgagee Letter soon with the details, along with an update to the FHA/HUd website.

The bill also extends the National Flood Insurance Program (NFIP) until Dec. 16 to allow lawmakers time to consider long-term authorization of that program

In FHA’s annual report to Congress on November 15th, acting FHA Commissioner Carol Galante stated ‘In the midst of a tough housing market the FHA MMI Fund continues to be actuarially sound. Because of the Obama  Administration’s strategy to protect the FHA Fund – tightening of risk controls, increased premiums to stabilize near-term finances, and expanded loss mitigation assistance to avoid unnecessary claims – this past year’s endorsements had the highest credit quality ever recorded, and will yield historically high levels of net receipts in the years ahead.” Obviously, quite a different way of looking at things!

As Professor Gyourko points out in the report, FHA has not needed a direct recapitalization from Congress since its founding over three-quarters of century ago. However, for the past two years FHA has been substantially in violation of its capital reserve threshold of 2 percent of the insurance-in-force. FHA’s actuaries predict that the fund will start to rebuild capital in 2012 and return to within the 2% requirement by 2014.

Gyourko’s report claims that FHA is failing to recognize the true risk in the market and thus delivering to Congress an artificially low estimation of future defaults. FHA is assuming a state of recovery for the housing market in the future that does not have a basis in reality. At the least, FHA is failing to account for potential unrecognized risks in the massive numbers of new mortgages added within the last two years as FHA’s share of the mortgage market has increased massively. FHA has tripled its insurance in-force from $305 billion at the end of 2007 to more than $1 trillion through July, while the insurance fund is at 33.7 billion or .24 percent of the insurance-in-force.

According to the report, FHA is failing to account completely for the impact of massive numbers of borrowers with negative equity and the effects of continuing high unemployment rates. Both factors have been shown by research to be the leading causes of mortgage default. Given that real estate values can just as reasonably be expected to fall further as they can be to go up, a good case can be made that FHA’s actuaries are looking at their numbers through rose colored glasses. If the last few years have taught us nothing, we should at least have taken to heart that even the smartest among us do a poor job of predicting what can happen when the mortgage default snowball starts rolling downhill. We have many formerly highly rated pools of mortgages to attest to that fact.

In addition, FHA has incorrectly modeled the risk associated with FHA streamline mortgages by assuming that the risk had been removed as the older mortgages were paid off in droves over the last couple of years. Although the borrowers all now have lower payments, they are still at risk from growing negative equity and job losses. The risk has simply been moved from one mortgage to another.

More significantly, FHA has failed to account for the potential risk associated with borrowers using the $8000 tax credit to fund the down payments on their homes over the past couple of years. FHA itself has pointed out that borrowers who do not fund their own down payments default at three times the level of those who fund the down payment from their own resources. According to Gyourko, this could be a million or more borrowers!

Who knows? The economy could burst back to life and FHA could, as its officials assume, “grow out” of the problem without a problem. On the other hand, Professor Gyourko’s scenario could happen and the FHA could burn through the $33.7 billion in reserves within a couple of years. Anyone involved in the mortgage or real estate business in 2007 as one lender after another imploded due to the liquidity crisis should surely be able to imagine it happening. Once again, in the words of Professor Gyourko, “the only sensible strategy is to properly reserve for high expected losses, not to assume that one can grow one‘s way out of problems by presuming the future will be bright even though the past was dark.”

Here’s what HUD had to say about FHA’s annual report to Congress today. I find it amusing how the announcement is so politically worded:

The Department of Housing and Urban Development (HUD) today released its annual report to Congress on the financial status of the Federal Housing Administration (FHA) Mutual Mortgage Insurance (MMI) Fund. This insurance Fund is the backbone of the FHA single-family and reverse mortgage programs.  In reporting on findings of the annual independent actuarial study, HUD indicates that, in the midst of continued weakness in housing markets across the county, the MMI Fund capital ratio remains positive this year at 0.24 percent. With new risk controls and premiums put in place by the Obama Administration, the independent actuaries predict the Fund will return to the Congressionally-mandated threshold of two percent capital more quickly than was projected by last year’s review. The economic value of new insurance endorsements in FY 2011 for the Fund was nearly double that of FY 2010 endorsements, being close to $11 billion.

As was the case last year, the new actuarial study shows that FHA is expected to sustain significant losses from loans insured prior to 2009, and thus its capital reserve remains below the congressionally mandated threshold of two percent of total insurance-in-force. However, the actuaries’ report concludes that, barring a further significant downturn in home prices, the MMI Fund will start to rebuild capital in 2012, and return to a level of two percent by 2014 – outpacing last year’s prediction.  The actions taken by this Administration have put FHA into a position where the actuaries expect rapid growth in capital once the housing market begins a broad-based recovery.

“In the midst of a tough housing market the FHA MMI Fund continues to be actuarially sound,” said Acting FHA Commissioner Carol Galante. “Because of the Obama  Administration’s strategy to protect the FHA Fund – tightening of risk controls, increased premiums to stabilize near-term finances, and expanded loss mitigation assistance to avoid unnecessary claims – this past year’s endorsements had the highest credit quality ever recorded, and will yield historically high levels of net receipts in the years ahead.”

FHA’s capital reserve ratio measures reserves in excess of those needed to cover projected losses over the next 30 years. The independent actuarial reviews of the MMI Fund estimate FHA’s capital reserve ratio to be 0.24 percent of total insurance-in-force this year, falling from 0.50 percent in 2010. FHA’s total liquid assets (cash plus investments) grew by $800 million since last year, to $33.7 billion. That amount is $1.9 billion higher than at the end of FY 2009, and is also $7.7 billion higher than was predicted last year by the independent actuaries. At the same time, the economic net worth of the Fund fell by $2.1 billion this year, from $4.7 billion to $2.6 billion, as FHA continued to build loss reserves to prepare for greater claims in the coming years.

Losses on loans insured through the first quarter of fiscal year 2009 continue to place a significant strain on the Fund and are expected to reach $26 billion within a few more years. Though they were prohibited in 2009, the ongoing effect of so-called “seller-funded downpayment assistance loans” is still significant. The net expected cost of those loans, as projected by the independent actuaries, grew by $1.8 billion over the past year to $14.1 billion. Conversely, the actuaries found that the FY2010 and FY2011 books are expected to be very profitable, providing significant net revenues to offset losses on earlier books. Loans insured to-date under the Obama Administration are providing $18 billion in economic value for the MMI Fund. Under the base-case forecast used by the independent actuaries, the FY 2012 book will add an additional $9 billion in economic value to the Fund.

Since taking office in 2009, the Obama Administration has instituted sweeping reforms to strengthen the MMI Fund. New policies have improved loan quality, strengthened lender enforcement, and helped to protect future loan performance. This has been the most comprehensive update to FHA credit policies, risk management, lender monitoring, and consumer protections in its history. To emphasize this new commitment to risk management, HUD hired the first-ever FHA Chief Risk Officer and established a permanent Risk Office to expand FHA’s capacity to assess financial and operational risk, perform more sophisticated data analysis, and respond to market developments. HUD also increased enforcement of FHA lenders, eliminated approval for loan correspondents, and increased net worth requirements for lenders wanting to underwrite FHA loans. Additionally, HUD introduced a new premium structure that better aligns with current market conditions, and it set underwriting minimums that combine credit score and down payment requirements to balance risk management with broad access to housing credit for borrowers who have historically met FHA credit quality standards. Specifically, a minimum down payment of 10 percent is now required of borrowers with credit scores below 580 and applicants with credit scores below 500 are no longer eligible for FHA insurance.
Over this past year, FHA:

• Served more than 1.2 million households and insured $218 billion in single-family mortgages, bringing the active single family portfolio to more than $1 trillion.
• Enabled more than 585,000 families to become homeowners for the first time. This represents 56 percent of all first-time buyers in the nation.
• Helped more than 362,000 families avoid foreclosure through loss mitigation actions.
• Helped 440,000 families to refinance their mortgage at lower interest rates, saving households an average of more than $160 per month.
• Provided access to credit for close to 40 percent of all homebuyers needing mortgages, including 60 percent of all African-American and Hispanic homebuyers.
• Reduced mortgage payments for 142,000 distressed homeowners through loan modifications. While standard modifications reduced typical payment burdens by 11 percent ($85), FHA HAMP actions reduced average mortgage costs by 24 percent ($218).

There is more detailed analysis of the announcement available on Mortgage News Daily.