Posted on Monday, March 15, 2010
Best guesstimates are FHA would insure 300,000 fewer home loans per year if the mandatory down payment was raised from 3.5% to 5% as is being suggested. But the real question is how many of THOSE loans would default anyway? In other words, how many GOOD loans would not be done, how many QUALIFIED buyers owuld be turned away. Remember FHA not keeping up with the times is what "forced" many into subprime loans so with these tighter standards we also need a shift in our attitude about buying a home and to understand raising the bar may mean inventories are not absorbed as quickly. Another suggestion is raising the upfront mortgage insurance premium to 2.25% of the loan amount, up from 1.75% or decreasing seller contributions to 3%.
FHA insured 30% of SF mortgages in 2009 compared to FHA’s historical market share of 10 to 15%.