Industry NewsMortgage

FHA not ‘the new subprime’?

Fed analysis shows prime borrowers fueled growth

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Rapid growth in Federal Housing Administration loan guarantees may be a byproduct not only of the demise of subprime lending, but higher loan limits and the limited capacity of private mortgage insurers, a Federal Reserve analysis of data collected from mortgage lenders and other sources reveals.The Federal Reserve report, released Wednesday, suggests that most of the the growth in FHA lending has been in lending to borrowers with higher credit scores, which could bode well for future claims against the FHA insurance fund.On Jan. 1, the Department of Housing and Urban Development will tighten credit standards on FHA loans and implement new rules for appraisals, saying the capital reserve ratio of the FHA insurance fund is expected to fall below statutory minimums (see story).The announcment of those changes followed the passage of legislation that's intended to help FHA combat fraud and lax underwriting by hiring additional staff and upgrading its technology -- a move prompted by fears...