Monday, September 20, 2010

37% of new mortgages now issued by FHA

Why is this figure is so important to the current price of housing>  In 2005-2006 lenders were willing to underwrite low-down payment purchase loans, and FHA was only about <2% of the market share.  Now lenders are unwilling to take that risk, so the Federal government through HUD is now insuring these low-down payments loans in case they foreclose.  Recently, the PMI fees have increased for these loans.   
Mortgages insured by the Federal Housing Administration accounted for 37% of all originations in 2009, up from 26% in 2008 and 7% in 2007, according to the Federal Financial Institutions Examination Council.
In addition, you can have a FICO score as low as 500 to qualify for an FHA loan., making us  responsible for the bad debt since we back the loans as new sub-prime lender. Now what happens if this program is pulled or goes bankrupt and now you lost 37% of potential buyers.   This will impact the housing market and put pressure on the price of homes.

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