FHA Mortgages Reviving

October 16, 2008

A few decades ago, most home financing was with mortgages insured by the Federal Housing Administration (FHA). But later the popularity of these loans dropped dramatically, largely due to restrictions on FHA home mortgages. They just weren’t competitive with offered conventional mortgages.

Today, however, FHA loans are experiencing a strong revival. Certain restrictions and loan limits have been lifted, making them very attractive to persons purchasing a home, or refinancing an existing mortgage in many parts of the country. About 29 percent of all mortgage applications in July were for government-insured loans (FHA and VA mortgages), according to a report on Lenderlicense.com. The share of these mortgage applications has tripled since July of last year. FHA refinance applications have increased by 317 percent over the past year. In July and August, lenders originated $47.9 billion in FHA loans, nearly topping the $54.3 billion originated over the previous three months, the report stated.

"FHA mortgages are now our fastest growing products," said Scott Stern, CEO of Lenders One, a major mortgage company. "Now we are almost 48 percent conventional and 48 percent FHA mortgages. The FHA insurance program has not raised its fees or tightened its underwriting standards, as Fannie Mae and Freddie Mac have, along with private mortgage insurance companies."

Pat Combs, immediate past president of the National Association of Realtors, made this comment: "FHA offers a safe alternative to many of the subprime and exotic loans that caused much of today’s market turmoil, and the program is easier to use than ever before. Recent revisions to the FHA program will enable more families to achieve their dreams of homeownership, and will allow others to refinance their mortgage at terms that will allow them to keep their home."

Over the years, the FHA program has had its ups and downs, but it has served a major role in pushing homeowner rates very high in this nation. Today, it’s serving as a viable option, particularly for persons purchasing their first home, or those needing to refinance into a loan they can manage.

Posted in Lending, Real Estate