A recent FHA audit answered two pressing questions:
1) Will FHA be the next candidate for a bailout?
2) Can FHA continue to handle the increase in volume?
The answers to these questions are important as the FHA is shouldering much of the responsibility for stabilizing the housing market. The net worth of the FHA is down due to the drop in housing prices, but the agency is secure for at least the next 8 years. From looking at this audit report, it appears that the FHA is actually growing stronger as its guidelines are tightening, which increases the number of better quality loans it is writing. Now 35% of borrowers have credit scores over 680 while only 5% have scores under 580. This is a reversal of the past when the numbers were 17% over 680 and 27% under 580. The FHA is actually the agency that is facilitating the bailout process for many homeowners and is not a candidate for bailout itself.
With new programs like Hope for Homeowners coming into existence, can FHA handle the increased load? Over the past 15 months, the FHA has shown it can handle four times as many loans as 2007 levels. One reason is because FHA lenders can perform all of the loan processing, underwriting, closing, and insuring functions without any HUD reviews. Also, FHA technology is resilient and sound, which makes it adaptable to future demand.
An FHA-guaranteed loan might be a great way to finance your next Denver home. Contact me for details.
Marianne Bandy
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