Magazine article Mortgage Banking

Growth Spurt

Magazine article Mortgage Banking

Growth Spurt

Article excerpt

It's no secret the Federal Housing Administration (FHA) is one of the few things propping up the mortgage market today. In March of this year, preliminary numbers showed FHA was providing the financing for 18.61 percent of all households buying a house in 2010 (on a seasonally adjusted annual basis). That's way up from a low of 3.77 percent in fiscal year 2006, which was the old normal.

Yes, Fannie Mae and Freddie Mac are important, too. There is no doubt about that. But the government-sponsored enterprises (GSEs) are taking only the most pristine borrowers. In May testimony, the GSEs' top regulator told Congress that last year 85 percent of the loans Fannie and Freddie purchased were to borrowers with credit scores equal to or greater than 720. Half of the loans they bought in 2009 had loan-to-value (LTV) ratios of 70 percent or lower. So what about young first-time buyers with significant consumer/student debt loads and meager savings for a down payment? Forget about it.

That's where FHA comes in--and for vets, the home loan guaranty program run by the Department of Veterans Affairs (VA). These programs serve that demographic--the very people buying houses today. A practitioner survey from the National Association of Realtors [R] (NAR) found that first-time buyers purchased 49 percent of homes in April. The NAR survey found repeat buyers accounted for just 10 percent, investors were 15 percent and all-cash buyers represented 26 percent of buyers in April. Granted, the expiring federal tax credits for first-time buyers and repeat buyers skewed these numbers a bit. …

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