FHA Mortgage Guide

With FHA stepping up to the plate recently, people are beginning to question whether they are ready to take on such a responsibility. In this current liquidity crisis, if you have less than a 20% down payment your options become quite limited. There aren’t many private investors willing to touch these loans, and Fannie and Freddie couldn’t even help you if they wanted to. That leaves many home owners with the only option of FHA loans and it is expected to be the growing trend as credit continues to tighten.

Bloomberg estimates that by the end of this year, “FHA will guarantee 3 in 10 U.S. borrowers, many of whom have bad credit or loans that required no verification of income.” In addition, Congress wants FHA to do even more. In the past week, the Hope for Homeowners program authorized the agency to guarantee an additional $300 billion worth of struggling mortgages. But with FHA employing less than a thousand people nationwide, FHA is letting Congress know it needs upgraded technology and at least 150 workers immediately.

FHA Faces More Problems than Budgeting Issues

The real question is whether FHA is ready for the wave of loans coming its way.  With subprime and Alt-A borrowers out of options, many are back to renting or worse; but some are finding ways to slip by. With FHA now one of the only options available, the real worry is that the agency might begin mirroring some of these problematic companies getting bailed out today.  So the plausible question that arises in the midst of these breaking headlines is, will there be an ‘FHA Bailout’ in the future?

During the housing boom, FHA sat quietly on the sidelines as private investors and exotic banks offered much more attractive loan options. But with those options gone today, people are looking at FHA as the new all-star in town.  Sure, they bumped up the required 3% down payment to 3.5% and planned to eliminate their Down Payment Assistance program. But is it enough? And with mortgage brokers and loan officers calling FHA the “main game in town”, one can’t help but wonder if FHA is ready for all this attention.

If FHA is planning on taking on riskier loans and more responsibility, they’ll need that $65 million from Congress to acquire the proper risk-management assessment tools and personnel. But monetary budgets aside, FHA will also need to revaluate its business model before it becomes a dumping ground for the loans cast away by this housing market.

Check out these FHA resources for more information

This entry was posted on Monday, October 6th, 2008 at 10:36 am and is filed under . You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.