In 2007, the housing crisis happened making Federal Housing Administration mortgages possible to receive. The FHA virtually eliminated barriers to entry into the housing market to keep mortgage lending from entirely drying up. FHA mortgages became so popular that today they make up nearly a third of the mortgage market. Now those loans are the ones with more risk and delinquencies. There aren’t as numerous losses covered from delinquent loans from the FHA anymore. FHA mortgages may have their easy terms changed.
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. The Real Estate Channel reports that the FHA said 6.2 percent (about 360,000 loans) of the entire insured FHA mortgage portfolio had been issued to homebuyers with FICO scores lower than 500. Foreclosures, bankruptcy or 60 days delinquent are the result of 37 percent of these loans. Foreclosure was avoided by 450,000 families in the 2009 fiscal year because of help that came from the FHA. In the first quarter of 2010, the FHA helped another 122,000 families. The Office of Comptroller of the Currency and the Office of Thrift Supervision said 67 percent of these modified FHA mortgages were in default again within 12 months. More than 90 days delinquent were 555,000 FHA mortgages in May 2010.
Harder to get FHA reserves because of limited funds
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. SmartMoney.com reports that last week the Senate passed a bill that allows the annual insurance premium to increase on FHA mortgages. At least a 580 credit score has to be met to qualify for a 3.5 percent down payment with the FHA. Borrowers with a credit score between 500 and 580 can have to make a down payment of at least 10 percent.
All new needs for FHA mortgages
There could be new FHA mortgage loan requirements once September 2010 hits. Chicago77 reports that they may place home ownership out of reach for buyers who just squeak by. When buying a home, the FHA calls for the buyer to pay a 1 percent insurance premium on the home. The good news is that this is down from the 2.25 percent at the moment required. The bad news is the monthly figure will increase from .55 percent annually to .90 percent annually. Chicago77 shows what a $ 150,000 home purchase would look like:
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
Discover more details on this subject
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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