We all know that FHA has been a major player in the survival of real estate financing in the aftermath of the great mortgage meltdown. With down payments and credit criteria more relaxed than conventional financing, FHA remains the only pathway for home ownership for many Americans. But, how healthy is FHA, and can they sustain this momentum?
FHA's Capital Reserve Ratio as mandated by Congress, measures reserves in excess of those needed to cover projected losses over the next 30 years. After sustaining significant losses from loans insured prior to 2009, FHA's Capital Reserve Ratio was reported at 0.50% of total insurance-in-force for 2010. This is well below the threshold of 2.0% required by Congress.
FHA has put new guidelines into effect to reduce loan losses and rebuild their reserves yet they don't anticipate reserve ratios to return to 2.0% until 2015. To the consumer, that means a continuation of higher down payments, better credit profiles, and increased annual mortgage insurance premiums. But, they are still the best game in town. Going forward, these stricter measures will help to maintain their survival and ability to provide homeownership that does not put the taxpayers at risk.
Related FHA Requirements for SFR (loans > 15 years) as of October 4, 2010:
Down Payment: 3.5%
Up Front Mortgage Insurance Premium: 1.0%
Annual Premiums: 1.55% when LTV is >95%
1.50% when LTV is < or = 95%
The 2011 maximum FHA Loan Limit for a SFR in Maricopa County, AZ is $346,250
Mission Statement:
HUD's mission is to create strong, sustainable, inclusive communities and quality affordable homes for all. HUD is working to strengthen the housing market to bolster the economy and protect consumers; meet the need for quality affordable rental homes; utilize housing as a platform for improving quality of life; build inclusive and sustainable communities free from discrimination; and transform the way HUD does business.
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