Federal Housing Administration mortgages saved the housing market from total collapse when the housing crisis emerged in 2007. The FHA virtually eliminated barriers to entry into the housing market to keep mortgage lending from totally drying up. FHA mortgages became so popular that today they make up nearly a 3rd of the mortgage market. But risks and delinquencies from those loans are increasing. The FHA before would cover losses that occurred when a borrower defaulted onto their loan, although that is not happening as much anymore. There will be a change soon so FHA mortgages aren’t so easy to get. Post resource – Expect tougher FHA mortgage loans due to increasing risk of default by Personal Money Store.
FHA mortgage insurance takes a big hit
FHA mortgages weren’t a factor in the housing crisis, but its lax standards for mortgage insurance are a problem now. According to the Real Estate Channel, 360,000 loans, or 6.2 percent, from FHA were given to buyers who had 500 or less in FICO scores. Foreclosures, bankruptcy or 60 days delinquent are the result of 37 percent of these loans. During the housing crisis, the FHA helped 450,000 families keep their homes out of foreclosure in fiscal year 2009. In the first quarter of 2010, the FHA helped an additional 122,000 families. There was a default rate of 67 percent within the next twelve months after being helped by the FHA, reports the Office of Comptroller of Currency and the Office of Thrift Supervision. The number of FHA mortgages delinquent more than 90 days climbed to 555,000 in May 2010.
Terms becoming tougher for FHA reserves
On Sept. 30, 2008, the Capital Reserve Account for the FHA was $ 19.3 billion, when in 2009 it had gone down to $ 3.5 billion, which is why the FHA is trying to protect itself. As outlined by SmartMoney.com, a premium annual insurance for an FHA mortgage could be increased with a bill passed by Senate recently. For the 3.5 percent down payment, the FHA needs a 580 score. A credit score between 500 and 580 would require a 10 percent down payment to be made.
FHA mortgage loans with new requirements
September 2010 is when new FHA mortgage loan needs can be put into place. According to Chicago 77, those buyers who can barely afford a home will no longer be able to get to that point. An upfront mortgage insurance premium that is 1 percent of the loan must be paid by the borrower to the FHA. This has gone down from what was initially required, 2.25 percent. Sadly, the monthly figure can be .90 percent annually rather than the .55 percent it was before. A $ 150,000 home is shown by Chicago 77 as an example:
Before Sept. 7 2010
Upfront Premium (2.25 percent): $ 3,256.88
Monthly payment including mortgage insurance: $ 793.93
On or after Sept. 7 2010
Upfront Premium (1.00 percent): $ 1,447.50
Monthly payment including mortgage insurance: $ 826.93
Net changes
Upfront cost: Decreased by $ 1,809.38
Monthly cost: Increased by $ 33.00
Real Estate Channel
realestatechannel.com/us-markets/residential-real-estate-1/real-estate-news-fha-mortgages-mortgage-backed-securities-mbs-federal-housing-administration-fha-department-of-veterans-affairs-va-congress-home-loans-keith-jurow-2969.php
SmartMoney
smartmoney.com/personal-finance/real-estate/the-fha-rethinks-its-mortgage-lending/
Chicago77
thechicago77.com/2010/08/major-fha-changes-coming-on-the-september-7th/
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