A Tough Balance — FHA tightens mortgage loan standards
The Federal Housing Administration (FHA) is an government agency that “sets standards for construction and underwriting, and insures loans made by banks and other private lenders” (Wikipedia).
As the Washington post illustrates, the FHA regained relevance after the mortgage crisis of 2008, when borrowers turned back to it for default insurance support — increasing the volume the FHA managed (up to 30% of all new single-family home purchase mortgages in the past year and a half). However, with these new loans also came a higher number of defaults, and FHA’s reserves are running low. If funds run out, our taxes would pay for these defaults.
What can we expect?
FHA is tightening its standards for borrowers. However, borrowers wont be the only ones to pay the price, as this would also imply a lower demand in the housing market — which has already experienced declining home sales.
Works Cited:
http://www.washingtonpost.com/wp-srv/business/fha-loan-modifications/
