FHA On Solid Ground: Hope for Purchasers and Sellers of Southern New Hampshire Real Estate

The Federal Housing Administration now covers at least 30% of new home loans, so when the FHA commissioner David Stevens announced this fall that it might not make its 2% capital reserve, people were understandably nervous.  Once it was out that the FHA wouldn’t meet its 2% (please note that the FHA itself is the one who broke the news), news portals, blogs and other websites spread the news that the FHA was a train wreck. However, a follow up interview with David Stevens on CNBC cleared the air a bit and gives hope to Southern New Hampshire real estate purchasers seeking FHA loans.

It appears that the FHA, put in place for instances like this when people can’t afford other loans, actually has two capital accounts and the one with a 2% goal is a backup account.  According to Stevens, the FHA has “lots of capital in primary reserve to cover expected defaults.” Combined, FHA capital is over $30 billion dollars, and though the FHA's 2009 Actuarial Review Briefing report indicates significant losses expected on loans made before 2009, it concludes that under most economic scenarios considered the FHA’s reserves will remain positive.

The FHA has also taken action to address risks to its portfolio.  Instead of immediate risk management in the form of strict borrower guidelines (like the tighter guidelines Fannie Mae and Freddie Mac have put on condo mortgages) that might make it harder on potential Southern NH real estate owners, the FHA is going for some management and process changes. The changes include hiring a chief risk officer and requiring higher capital standards for loan originators.

At the present, says Stevens, the FHA isn’t considering a minimum credit score, and they may not have to. Looking at their portfolio, the average credit score has gone up 60 points, from 630 to 690, pointing to a higher quality of borrowers.

So, when thinking about buying Southern New Hampshire real estate and looking at mortgage companies, don’t forget to look at the FHA. If Fannie Mae and Freddie Mac are lending, the FHA is – and it’s going strong!

You can watch the CNBC video for the full interview.

If you’re looking for a beautiful home, I can help.  Contact me now at 603-821-1134 or email me at dave@daveheeter.com for more information.