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More Than Three Million FHA Loan Apps This Year?

by Peter G. Miller
February 9th, 2009

There are some amazing numbers which are beginning to come from the FHA.

It seems not only that FHA mortgages are wildly popular, but they’re replacing a large chunk of the private-sector lending system.

As of the end of January, HUD is saying that it expects some 3.1 million FHA loan applications in the fiscal year that ends in September, a figure up 81.5 percent from last year.

In general terms, the National Association of Realtors is estimating that “existing-home sales –- including single-family, townhomes, condominiums and co-ops -– jumped 6.5 percent to a seasonally-adjusted annual rate of 4.74 million units in December.” In comparison, adjusted annual rate for existing home sales stood at 6.22 million units in December 2006.

The National Association of Home Builders also has some figures. It says “the inventory of new homes for sale declined for the 20th consecutive month in December to 357,000, while the months’ supply at the current sales pace increased for a third consecutive month to 12.9.”

In other words, while home sales have slowed substantially, the FHA program is soaring.

The reasons for growth with the FHA program are fairly obvious: You can’t get many of the so-called “affordability” loan products pushed by lenders during the past few years. If you don’t qualify for the VA program, then if you want to buy with less than 20 percent down you purchase with either an FHA loan or a conventional mortgage backed with private-mortgage insurance (MI).

Hope for Homeowners

While the FHA loan program is booming, the Hope for Homeowners program is a dud. Actually, to call it a “dud” would suggest that it had some possibility of action and at this moment there is no evidence to support such a notion.

As of the end of January, HUD reports that it received 465 H4H loan applications since the program began last October. Not one application has resulted in a new loan.

Given the needs of the country, there is no question that Congress is going to either expand the Hope for Homeowners program — or bury it.

The H4H program depends on lender concessions to work and it has stiff costs for borrowers. The miracle, perhaps, is that 465 borrowers even bothered to apply for financing under the program.

The intentions with this program are entirely reasonable, but the barriers are huge in terms of the concessions required by both borrowers and lenders. By no standard is this program a give-away, regardless of what critics say.

However, there is one reason to watch the Hope for Homeowners program — if the market gets worse the costs associated with the H4H may be better than the alternatives offered in the marketplace.

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3 Responses to “More Than Three Million FHA Loan Apps This Year?”

  1. Paul Anselmo Says:

    “As of the end of January, HUD is saying that it expects some 3.1 million FHA loan applications in the fiscal year that ends in September, a figure up 81.5 percent from last year.”

    Have you seen the “technology” FHA uses to review and endorse loans?

    A joke. this is a train wreck waiting to happen.

  2. Peter G. Miller Says:

    The way private-sector lending is falling off HUD may be right on this one.

    Whether we will also have a train wreck is to be seen.

    Thanks for your note.

  3. Joe Lovrek Says:

    I have a few comments to make on this topic being that I am in the mortgage banking and lending business and I have never been the one to keep my mouth shut, even if it means I will get a lot of heat falling on me:

    1st: Why is a home builder make any kind of comments saying that FHA is lending too easily?? Something sounds wrong with that picture being that is how their homes are getting purchased and they still have income, I mean come on, there is no way this guy is selling his homes to only 700+ credit score clients..ha-ha

    2nd: Why are people bashing FHA about easy lending when in all actuality, we do maybe 1/8 of the loans we use to because the guidelines are already too strict. Credit scores greater than 620 is scarce right now and when you do get one of those clients, you have to weigh out other options to get an approval also as its more to it than getting over a 620 credit score.

    3rd: If credit criteria was to go up to 640 – 680, this would make it to where hardly no one would get a house, if they want the economy to slow way down, that would be perfect, and maybe then when Robert Toll goes out of business, he will stop and think.

    Let’s think on a whole new level, maybe FHA wants to raise the credit score even higher, and is using this propaganda to do so. If it’s blamed on people saying that credit is too easy, when they raise the scores, no one can blame them… Even though we all know it would be hog wash…

    The money is really needed and the economy will need to be jump started till the battery can run on its own and charge itself, there is no way around it. So bashing anyone right now, president included is ludicrous for many reasons, just to name a few:

    1st: It does not matter what others think of president Obama, he is our president and if he makes decisions, we need to stick by him cause if we are bashing our own president, what makes other countries think we are any different than any other 3rd world country?

    2nd: You put on the presidents hat, and do exactly what you think Obama needs to do as in don’t spend any money, do all your speeches, and tell people that you are just going to watch the US repair itself with no government help, and if you do give aid, only give enough to support 1/2 a state and not the other 49 1/2, after all, you don’t want to add to much to the deficit do you? Ha-Ha…

    We all need to drop the politics, and ban together with our president regardless if we do not approve of all his decisions and back his funding of the housing industry. Obama is our president and as a whole we need to back him, as what our ancestors have said before quoted by John Dickinson and I think it’s still on par “United we stand, divided we fall!”

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