The reason Federal Housing Administration mortgages happened was because of the housing crisis in 2007. To keep mortgage lending from stopping completely, the FHA helped people get loans. FHA mortgages became so popular that today they make up nearly a 3rd of the mortgage market. There are more risks and delinquencies with those loans now. And The FHA’s reserve funds used to cover losses when borrowers default or go into foreclosure are shrinking. There could be a change soon so FHA mortgages aren’t so easy to get.
FHA mortgage insurance begins to fade
Mortgage insurance for FHA loans being so low was fine during the housing crisis but is really hurting right now. FICO scores were less than 500 for 6.2 percent, or 360,000 FHA loans, reports the Real Estate Channel. 37 percent of these loans have ended up being foreclosed on, in bankruptcy, or 60 days delinquent. During 2009’s fiscal year, 450,000 families were helped by the FHA to stay away from foreclosure. 2010’s first quarter had the FHA helping 122,000 families keep their homes. 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. In May 2010, 555,000 FHA mortgages were delinquent more than 90 days.
Harder to get FHA reserves because of limited funds
The FHA is safeguarding its Capital Reserve Account because from Sept. 30, 2008 to 2009, the account went down from $ 19.3 billion to $ 3.5 billion. SmartMoney.com reports that last week the Senate passed a bill that allows the annual insurance premium to increase on FHA mortgages. The FHA is also considering a minimum credit score of 580 to qualify for the 3.5 percent down payment. A 10 percent down payment at the very least would be required with a credit score between 500 and 580.
New FHA mortgage loan needs
September 2010 is when new FHA mortgage loan needs will be put into place. Chicago77 reports that they may place home ownership out of reach for buyers who just squeak by. 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 originally required, 2.25 percent. Unfortunately, the monthly figure can be .90 percent annually instead of the .55 percent it was before. :
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
Additional reading
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/
