FHA – This will work out great

23:15 UTC 05 Nov 2009 2 Comments

FHA loans are the new exotic mortgage out there. Every addict … I mean person involved with real estate is gobbling up as much as they can get with the Government backing. It seems that the banks have learned a lesson from the mortgage fallout by actually requiring people to establish equity in a home right off the bat with 20% down, but the Government is much more savvy only requiring 3.5% down. Im sure this will work out great for all involved… by the way if your an American citizen that means you.

There is a good article in the New York Times that is related to this at this link and a graph

FHA has guaranteed about 25% of all new U.S. mortgages written in 2009, up from just 2% in 2005.
Delinquency rates have skyrocketed to 32%
Portfolio size is 800 billion to 1 trillion
80% of new mortgage origination – Govt involved with (FHA, Fannie, Freddie)

Kenneth Donohue, the inspector general of the Housing and Urban Development Department, who is also F.H.A.’s watchdog. Mr. Donohue said the drop in reserves was “a flashing red light” that the agency was not taking seriously enough. “It might be we’ll get ourselves out of this and that everything will be fine, but I don’t paint that rosy a picture,” Mr. Donohue said. “They’re banking on the fact that the economy will continue to improve, that the housing market will begin to sustain itself.” He noted that if private lenders had raised their down payment requirements in the last two years, it raised the question, “what does the F.H.A. think it is doing by asking only 3.5 percent?”

Also to make things interesting we are in the “eye of the storm” in terms of the infamous mortgage reset chart … our article on this