Friday, May 16, 2008

FHA to the rescue!

Forbes.com reports that the savior of the mortgage mess will be the FHA, in partnership with lenders willing to work with it. Lenders are scrambling to become FHA approved, as the Federal Housing Administration is fast becoming the bank's best friend.

Some major US lenders are again enticing risky borrowers with attractive terms and as little as 3% down. Wells Fargo is looking for borrowers, with some help from the federal government.

Though "FHA delinquencies tend to be quite high," states Alex Pollock, former president of the Federal Home Loan Bank of Chicago. "They are substantially higher than the prime market - not as high as the subprime market, but nonetheless quite high. You're in a sector of the market that is by definition risky."

Bill Glavin, special assistant to FHA Commissioner Brian Montgomery, expects the FHA to increase loan volume by 162% in the fiscal year 2008.

From Wells Fargo to Countrywide to Bank of America, lenders are actively promoting FHA-insured loans through all of their sales channels.

The FHA's role in the market "will clearly fill the void of subprime financing," says Vicki Wagner, an analyst at Standard & Poors. Wagner said an FHA loan "by definition, looks and acts like a subprime loan."

On the same note, Cyril Moulle-Berteaux, managing partner of Traxis Partners, LP, a NY-based hedge fund firm, writes in his Wall St. Journal On-Line op-ed that "The Housing Crisis is Over", as of May 6th.

His indicators:

  • Though being at the bottom does not indicate a return to booming prices, the trend is no longer getting worse.
  • This current housing bust is the better part of three years old. Home sales peaked in July, 2005. He quotes home sales down 63% from peak levels of 1.4 million. When adjusted for population growth, housing starts are off 50%, falling to 1982 levels.
  • Residential construction is near 15 year lows.

How, then, is the crisis over? Homes are once again affordable and unsold inventory will continue to decline and will peak out in a couple of months.

So, all of that sounds wonderful to me! And, we are FHA approved in 14 counties! So, give us a call when you get to be an FHA lender!

And, 'til next time, it's all good!

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