St Louis Mortgage Blog

St Louis Home Mortgage and Refinancing News -

News:  FHA loans getting more expensive?

Currently, Federal Housing Administration (FHA) loans comprise more than 30% of the entire home-loan market. But as some of those insured loans have defaulted, the FHA loan-guarantee fund has slipped below the Congressionally mandated 2% level.

As a result, some lawmakers are suggesting that FHA loans need to be more expensive to obtain.  A House bill, the FHA Taxpayer Protection Act of 2009, would increase the minimum down payment required to obtain an FHA loan to 5% from 3.5%. That, sponsor Rep. Scott Garrett, R, N.J., believes, would make borrowers more committed to maintaining their mortgages. 

Almost 90% of FHA purchase loans issued between January and August 2009 had loan-to-value (LTV) ratios of 96 or higher, according to written testimony from Robert Story, chairman of the Mortgage Bankers Association.  That amounts to a very small commitment on the parts of buyers. 

"We have made the decision to exercise our authority to increase the up-front cash that a borrower has to bring to the table in an FHA-backed loan -- to make sure that FHA borrowers have more 'skin in the game' and a stronger equity position in their loans," said Housing and Urban Development secretary Shaun Donovan.  Still, he added, "FHA is not 'the next subprime' as some have suggested."

St Louis Mortgage and Real Estate News brought to you by Floyd Tapia and Liberty Lending Consultants.  Call the home loan and refinancing experts at 314-698-4092 and ask for Steve Swan or Doug Stahlschmidt.