Home Builders See New Value in FHA Loans

by Peter G. Miller
June 5th, 2007

“Comprehensive FHA reform would mean greater flexibility in responding to the needs of borrowers, enabling more working families to become homeowners, and providing a viable alternative to the volatile subprime market,” says Jerry Howard, Executive Vice President of the National Association of Home Builders.

“National Homeownership Month is the perfect opportunity to highlight this area where change can result in thousands more Americans realizing the dream of homeownership.”

With the housing boom, according to NAHB, many borrowers turned to exotic loans that they can no longer afford now that the interest rates on their adjustable rate mortgages are moving upward. FHA loans have become an increasingly popular alternative for homeowners who are facing these higher monthly payments. With restrictive loan ceilings and without other much-needed changes, however, FHA simply cannot reach all the borrowers who need the safety net that the loans can provide.

NAHB says that the FHA loan program could potentially assist tens of thousands more borrowers who need an exit strategy from their subprime mortgage by insuring fixed-rate, adjustable-rate and hybrid adjustable-rate mortgage loans to borrowers with limited cash reserves and/or slightly tarnished credit. But even with the adverse headlines, subprime lending remains an important alternative for households who can not qualify for a mortgage from a prime lender — provided that it is legal, fiscally responsible and ethical.

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