FHA, THE ONCE AND FUTURE KING

I BROKE INTO THE MORTGAGE INDUSTRY IN THE MID 80'S. AT THAT TIME MY TERRITORY (YES, MORTGAGE COMPANIES GAVE LO'S CERTAIN AREAS, USUALLY DETERMINED BY COUNTY, TO AVOID OVERLAP) WAS A HARD-WORKING, BLUE-COLLAR TYPE NEIGHBORHOOD. THIS WAS THE PERFECT MARKET FOR GOVERNMENT LOANS, AND I CUT MY TEETH ON FHA/VA FINANCING. WHY FHA? FHA WAS MORE LENIENT WITH PAST CREDIT DINGS ( A LOT OF OLD-TIMERS WILL CHUCKLE REMEMBERING THE CREDIT EXPLANATION LETTERS, COMPLETE WITH TEAR STAINS) AND WAS MORE TOLERANT OF JOB CHANGES. THEY ONLY NEEDED A 3% DOWN PAYMENT. NO RESERVES REQUIRED. THE WHOLE 3% DOWN COULD BE GIFTED. THE ONLY THING THE LOAN OFFICER HAD TO SWEAT WAS THE FHA APPRAISAL. THIS APPRAISAL ALMOST DOUBLED AS A HOME INSPECTION, ALTHOUGH FHA MADE IT CLEAR THAT IT WAS NOT TO BE CONSTRUED AS SUCH. OFTEN YOU HAD A LIST OF REPAIRS THAT THE SELLER REFUSED TO PAY FOR, AND YOUR BUYER, WHO WAS OFTEN BARELY SCRAPING THE 3% DOWN PAYMENT TOGETHER, COULD NOT AFFORD TO PAY FOR. IF YOU GOT THROUGH THAT, YOU WERE USUALLY OK. FHA PURCHASES IN THE $90,000 TO $120,000 RANGE WERE A STAPLE OF MY PIPELINE. THE EARLY 90'S CAME AND WITH THEM THE ADVENT OF THE SUB-PRIME PROGRAMS. SUDDENLY, YOU HAD NO REPAIR ISSUES (AT LEAST NOT TO THE EXTENT THAT FHA WOULD HAVE YOU ADHERE TO), NO MIP, AND EVEN MORE FORGIVING UNDERWRITING THAN FHA. FHA BECAME THE RED-HEADED STEP-CHILD, HANDED THEIR HAT AND SHOWN THE DOOR AND CAST OUT INTO THE DARKNESS OF NEAR OBLIVION. WELL, WE ALL KNOW WHAT HAPPENED TO THE SUP-PRIME LENDERS AND THEIR RELAXED UNDERWRITING. AND FHA IS BACK, BIG TIME. THEY STILL HAVE MORE TOLERANT UNDERWRITING THAN CONVENTIONAL LOANS, THEY STILL ACCEPT 100% GIFT AS DOWN PAYMENT. AND NOW THE APPRAISAL IS VIRTUALLY THE SAME AS A CONVENTIONAL APPRAISAL. HEY THEY'RE STILL GOING TO INSIST ON HAND RAILS FOR THE TWO STEPS OFF THE BACK DOOR. SO WHAT? OUTSIDE OF SOME OF THE RURAL AND FLEX PROGRAMS, WHOSE GUIDELINES ARE CHANGING ALMOST DAILY AND OFTEN HAVE INCOME OR AREA RESTRICTIONS OR RATE BUMPS, FOR THE BUYER WHO MAKES THE INCOME BUT IS SHORT ON DOWN PAYMENT, FHA IS A GREAT WAY TO GO. I HAD A REALTOR FRIEND BACK THEN WHO USED TO GET AN FHA APPRAISAL DONE ON EVERY HOUSE HE LISTED. THIS WAS PART OF HIS PRESENTATION. HE KNEW THE FHA APPRAISAL WAS GOOD FOR 6 MONTHS (STILL IS), AND HE KNEW THAT THIS WOULD TAKE THE GUESSWORK AND HOURS OF NEGOTIATION OUT OF THE LISTING AND BUYING PROCESS. 'HEY, HERE IT IS, THIS IS WHAT ITS WORTH, LETS AGREE UPON THE CONTRACTED SALE PRICE BEING THE APPRAISED VALUE, AND I'LL SEE YOU BOTH AT SETTLEMENT IN 45 DAYS'. SO, WHY FHA?WHY NOT?