In 2007, the housing crisis happened making Federal Housing Administration mortgages possible to receive. The FHA made it easier to get loans so mortgage lending so the market didn’t come to a complete stop. A 3rd of the mortgage market has been surviving off FHA mortgages. But risks and delinquencies from those loans are increasing. There aren’t as many losses covered from delinquent loans from the FHA anymore. There could be a change soon so FHA mortgages aren’t so easy to get.
FHA mortgage insurance dies off a bit
Mortgage insurance for FHA loans being so low was fine during the housing crisis but is really hurting right now. FICO scores were less than 500 for 6.2 percent, or 360,000 FHA loans, reports the Real Estate Channel. More than 37 percent of these loans are now at least 60 days delinquent, in foreclosure or in bankruptcy. During the housing crisis, the FHA helped 450,000 families keep their homes out of foreclosure in fiscal year 2009. 2010’s first quarter had the FHA helping 122,000 families keep their homes. The Office of Comptroller of the Currency and the Office of Thrift Supervision said 67 percent of these modified FHA mortgages were in default again within 12 months. In May 2010, 555,000 FHA mortgages were delinquent more than 90 days.
FHA reserves dying out making for harder terms
The FHA is protecting its Capital Reserve Account because from Sept. 30, 2008 to 2009, the account went down from $ 19.3 billion to $ 3.5 billion. FHA mortgages can have their annual insurance premium increased because of a bill passed in Senate last week, reports SmartMoney.com. For the 3.5 percent down payment, the FHA needs a 580 score. A 10 percent down payment at the very least would be required with a credit score between 500 and 580.
All new requirements for FHA mortgages
New FHA mortgage loan requirements will go into effect in Sept. 2010. Nobody is going to be able to buy a home by just barely meeting standards anymore, reports Chicago 77. An upfront mortgage insurance premium that is 1 percent of the loan must be paid by the borrower to the FHA. This has gone down from what was originally required, 2.25 percent. Unfortunately, the monthly figure can be .90 percent annually rather than the .55 percent it was before. A $ 150,000 home is shown by Chicago 77 as an example:
Before Sept. 7 2010
Upfront Premium (2.25 percent): $ 3,256.88
Monthly payment including mortgage insurance: $ 793.93
On or after Sept. 7 2010
Upfront Premium (1.00 percent): $ 1,447.50
Monthly payment including mortgage insurance: $ 826.93
Net changes
Upfront cost: Decreased by $ 1,809.38
Monthly cost: Increased by $ 33.00
Further reading
Real Estate Channel
realestatechannel.com/us-markets/residential-real-estate-1/real-estate-news-fha-mortgages-mortgage-backed-securities-mbs-federal-housing-administration-fha-department-of-veterans-affairs-va-congress-home-loans-keith-jurow-2969.php
SmartMoney
smartmoney.com/personal-finance/real-estate/the-fha-rethinks-its-mortgage-lending/
Chicago77
thechicago77.com/2010/08/major-fha-changes-coming-on-the-september-7th/
