FHA Mortgages Popular

October 10, 2009

FHA mortgages – loans insured by the Federal Housing Administration – are booming in popularity. In fact, the availability of these cost-effective mortgages is a major reason for the recent rise in home sales in most markets.

FHA loans reached a share of 23 percent of all mortgages at the end of the second quarter of this year. Some analysts are predicting a share close to 30 percent by the end of the year. Its share was only 2.7 percent three years ago, according to a report from Inside Mortgage Finance. Outstanding FHA loans reached $439 billion in fiscal 2008. That number is expected to reach $627 billion this year.

At the mid-year point, about 7.8 percent of FHA loans were 90 days late or more, or were in foreclosure, according to the Mortgage Bankers Association. That’s about the national average for all mortgage loans – up from 5.4 percent a year ago. FHA mortgage losses are offset by premiums paid by borrowers. Federal law mandates that FHA maintains reserves equal to at least 2 percent of the loans insured. The low interest rates and minimal down payment requirements of FHA loans make them very appealing to a growing number of home buyers, particularly first-time buyers.

Posted in Lending, Real Estate