When the subprime mortgage market imploded in 2007 there was a mad rush by mortgage lenders and borrowers to FHA loans. FHA went from about 3% of the market to something like 30% of the mortgage market in short order. That is because FHA was the last refuge for buying a home with little or no money down. The problem was that about the time FHA began insuring more mortgages, housing prices were tumbling across the country. As housing prices tumbled more people began defaulting on their FHA loans. Every time a borrower defaults on an FHA insured loan the FHA is on the hook to cover the losses. As a result there have been growing concerns that the FHA may become insolvent for the first time in its 70+ year history.
The FHA has been slowly tightening standards to shore up its stability. Upfront mortgage insurance premiums have been increased, FHA to FHA refinances (called streamlines) have become vastly less appealing than they once were with new restrictions and fees, and loopholes allowing borrowers to put no money down on purchases have been closed. Still the FHA is in a bit of trouble so congress is now looking at significantly increasing the monthly FHA mortgage insurance rates. Stay tuned. We’ll keep you posted on the news on that front.
In the meantime contact us in the sidebar to learn what programs you could qualify for now (before costs increase).