After two foreclosures and two bankruptcies, Hermes Maldonado is as surprised as anyone that he’s getting a third shot at homeownership.
The 61-year-old machine operator at a plastics factory bought a $170,000 house in Moreno Valley, Calif., this summer that boasts laminate-wood floors and squeaky clean appliances. He got the four-bedroom, two-story house despite a pockmarked credit history.
The last time he owned a home, Maldonado refinanced four times and took on a second mortgage. He put a Cadillac and Mercedes-Benz C300W in the driveway and racked up about $45,000 in credit card bills and other debts. His debt-fueled lifestyle ended only when he was forced into bankruptcy.
His re-entry into homeownership three years later came courtesy of the Federal Housing Administration. The agency has become a major source of cash for so-called rebound buyers – a burgeoning crop of homeowners with past defaults who otherwise would be shut out of the market.
“After everything that happened, thank God I was able to buy another house,” Maldonado said in Spanish. “Now, it’s good because the interest rates are low and there are lots of homes.”
The FHA, which backs nearly 8 million loans, is helping rebound buyers recapture the American dream, boosting the housing market in the process. But that’s touched off a fierce debate about the financial and ethical wisdom of bankrolling borrowers who contributed to the last housing bubble – and the potential cost to taxpayers.