My New Blog

Is FHA the savior of the housing and mortgage crisis? In today’s Washington Post Business section, Dina ElBoghdady explores the newly significant role the FHA finds itself in. Those in Congress are looking for a way to solve the mortgage crisis and are trying to find a mechanism to impact the mortgage and credit markets in order to help homeowners and buyers. The Federal Reserve has attempted to provide the credit markets with some support and stability. Now Congress is working to do the same with the housing markets.

Since the Federal Housing Administration insures mortgages and even though they have $21 billion dollars in reserves, there are new concerns that if they take on more “at-risk” mortgages they may need $1.4 billion in new appropriations to protect it from future losses. The current plan in Congress is to increase the size of loans it insures and modernize the agency to become a more effective player in the broader mortgage marketplace. Congress appears to be divided along party lines in support of the plan.

So how does this impact you and me? First, for the 1^st quarter of 2008 FHA loans for purchases and re-fi’s increased 126% from the same period in 2007. The article notes that the bulk of these new loans are “coming from solid borrowers who want to refinance their conventional loans into cheaper FHA mortgages”. This group is different from FHA’s traditional constituency of “first-time buyers, minorities and moderate to low income families”.

Companies that are FHA approved, both loan officers and appraisers, are benefiting from this increase in business.

Secondly, if the plans for FHA are approved in some fashion, then some of the pressure that currently constrains the market may be eased. Houses will start to sell, values will stabilize and buyers and sellers will become confident in the market again. All of this will help with improving the business climate for people like us.

In talking to a number of loan officers around the area, FHA loans are becoming the loan of choice for many and informed customers are taking advantage of the low rate programs offered. Some loan officers are doing almost 100% FHA work now. For appraisers, FHA work has increased significantly over the past 6 months and appears to be the fastest growing area of business.

Is FHA the savior of the housing crisis? Probably not, but it will play an important role in the housing market's recovery process. For now, working with FHA insured loans seems to be good business for everyone.

To read the entire article in the Washington Post, here’s the link: http://www.washingtonpost.com/wp-dyn/content/article/2008/05/06/AR2008050602985.html?hpid%3Dsec-business&sub=AR