FHA now represents over 1/3 of new mortgage loans

by Keith Landis on June 7, 2010

A few years ago, FHA loans made up less than 5% of all mortgage originations.  At that time, there were countless 100% financing options and easier qualifying guidelines for conventional Fannie Mae/Freddie Mac programs.  Most of these programs had less paperwork, no mortgage insurance requirement and fewer restrictions than FHA loans.

The collapse of the credit markets in 2007 mostly eliminated the 100% programs and caused conventional programs to be severely tightened.  This left homebuyers with very few low down payment programs to choose from.  The 100% programs were still available for military veterans via VA loans and those purchasing qualifying rural properties still had access to 100% USDA loans.  However, for the majority of homebuyers their main option became mortgages available through the FHA and their 3.5% downpayment requirement.

 

Will this trend of increased FHA market share continue?

Perhaps in the short run but in the long run… maybe not.

FHA has recently had some internal health problems of its own.  Their legally mandated capital reserves fell below minimum levels last year and as a result, the FHA has been tightening its belt and passing this on to consumers.  It has recently been announced that higher monthly mortgage insurance premiums will now be enacted on upcoming new FHA mortgages which will result in less exposure for the FHA but higher mortgage payments for consumers.

Keep an eye out for any headline news regarding FHA lending updates and contact your mortgage professional with any questions as to how these still tightening guidelines will effect your mortgage options.

 

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