FHA loan volume could double

Over the past ten years the role of the Federal Housing Administration (FHA) a division of HUD has seen it’s role in the U.S. housing mrket diminish. FHA loans had shrunk to cover less than 10% of the entire mortgage market as lenders pushed clients into conventional or alternative A loans that were easier to underwrite and sell of to wall street. The fall out of the U.S. housing market now the same lenders that bailed out on FHA loans scrambling to regain their licenses.

FHA loans are likely to grow and could represent one in every five mortgages originated over the next 12 months. The days of home buyers purchasing a property with zero down are all but over, however with an FHA loan a home owner can buy with as little as three percent down, all of which could come in the form of a gift. Home owners who are considering a refinance and need to pull cash out of their home to consolidate other bills can turn to an FHA loan as it allows them to access up to 95% of the homes appraised value. Conventional loans cap home owners at 90% of the homes value.

FHA is certain to have a growing role in the turn around of the housing market. Lenders will more likely work with borrowers as the FHA provides a great insulation against foreclosure risk and a ready pool to sell loans against in todays tight credit markets.