Mortgage and Real Estate Blog


FHA Mortgage Demand Doubles In Early October (2007)

FHA Mortgage Demand Doubles In Early October

It's the start of a new fiscal year in Washington, and for the FHA it's been a great time to be in the mortgage insurance business.

The latest figures from HUD show that FHA applications had an annual run rate of 1,285,800 inquiries in the first 15 days in October. This is up 74.6% when compared with a year ago.

Actual FHA applications during the first two weeks of October totaled 51,287 inquires, a figure that rose a whopping 99.4% over the past year.

A total of 25,823 loans were actually endorsed. Of this number, 53.1% were for home purchases, 32.1% were refinances and 14.9% or reverse loans, or what HUD calls "home-equity conversion mortgages" or HECMs.

What these figures mean is that the FHA program - which had actually been on the ropes for the past couple of years - is doing quite well. The program is insuring loans, loss levels are tolerable, and a vast new market for government insurance has begun to appear with the introduction of the FHASecure product. No one would be surprised if fiscal 2008 turned out to be another banner year for the government program.

Why is FHA "back"? Simple. FHA has always been the loan of choice for those with weak credit and low down payments. It fell out of favor as lenders offered similar products without a lot of the rules FHA loans had to follow. For example, Realtors never liked them because FHA could require repairs to the home before it could be sold to an FHA buyer. Items like painting, railings, and roofs quickly come to mind, while conventional or subprime loans did not have these guidelines. Furthermore, the requirements for lenders to actually to allowed to provide FHA loans was much more stingent, including net worth requirements and yearly audits. Therefore, most small lenders, especially since 2000, when a lender opened up on every corner - could NOT even offer FHA loans.

Unfortunately, many of the people who took subprime loans over the past few years could have and probably should have taken an FHA loan.

Today, many (not all) of the alternative weak credit and low down payment loans have disappeared. For many people, FHA now is the only route to homeownership. Because of this, many mortgage companies, unable to provide subprime loans anymore, are now desperately trying to stay in business by getting FHA approved.

We are proud to have been, and continue to be, a long time FHA provider. Call me today to discuss an FHA loan. It's a great loan - probably the same one YOUR parents used to buy their home!

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Comment balloon 0 commentsJoseph Metzler • December 08 2007 08:24AM


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