Changes are coming for Federal Housing Administration loans that will raise their costs and reduce their size, FHA Commissioner David Stevens told real-estate professionals gathered in Denver on Tuesday morning.
But the loans, a mainstay for first-time buyers, aren’t going away.
“The administration is not backing away from homeownership,” Stevens told attendees of the Realtor Rally at the Colorado Convention Center.
The federal government in one way or another supports more than 90 percent of mortgages being made.
Political pressure is mounting to reduce the liability of taxpayers, who have had to cover $150 million from the failure of Fannie Mae and Freddie Mac.
Options detailed in a white paper the Obama administration released late last month include eliminating government guarantees on mortgage securitizations, offering a guarantee only in times of crisis or guaranteeing loans only for the middle range of buyers.
“The role of the FHA stays the same in all three scenarios,” Stevens said.
But the white paper proposes raising the minimum down payment from 3.5 percent to 10 percent, said Tim Sandos, an executive with Wells Fargo Home Mortgage.
That would remain a much lower hurdle than the 20 percent to 25 percent that conventional loan markets are demanding. But if approved, it could knock a lot of first-time buyers out of the market, said Aurora real-estate agent David Barber with Re/Max Unlimited.
“The FHA product is a blessing for the first-time buyers who don’t have a lot of money for a down payment,” he said.
Barber said other changes will reduce what buyers can afford. On April 18, the mortgage- insurance premium on an FHA loan rises by 0.25 percentage points, increasing borrowers’ payments $30 a month on average.
Losses on loans made from 2006 to 2008 have depleted FHA reserves, and premium increases are needed to get back up to 2 percent, Stevens said.
The FHA cracked down on hundreds of lenders who violated its standards, and 2010 loans are showing some of the best performance on record.
During the credit crisis, FHA loans were lifted from 115 percent of an area’s median home price to 125 percent.
But that increase is set to expire this year. In metro Denver, the FHA maximum is now $406,250 but could fall closer to $370,000.
Aldo Svaldi: 303-954-1410 or asvaldi@denverpost.com
Article source: http://www.denverpost.com/business/ci_17569286
