The facts on FHA-insured loans

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The Ups and Downs of FHA: The importance of Federal Housing Administration-insured loans in the home mortgage market has changed markedly over the years. This has been due less to changes in the FHA itself than to changes in the broader market in which it operates. In the early 1990s, FHA had about 15 percent of the home purchase market. In subsequent years through 2006, FHA lost business to the growing subprime market, which took many borrowers who could have gone FHA. In addition, FHA lost business to the prime conventional market, which developed and aggressively merchandised option adjustable-rate mortgages (ARMs) and interest-only products, as well as reduced documentation underwriting, none of which FHA offered. In 2006, FHA's share of the purchase market had fallen to less than 4 percent. Then came the financial crisis. With home prices declining and defaults rising, the subprime market largely disappeared; option ARMs declined to a trickle; and documentation requir...