The Importance of the FHA

Here at Quest Loans, we specialize in FHA Loans. Many people don't realize that the Federal Housing Administration (FHA) has a very important role in the mortgage industry. When the private mortgage market collapsed, the FHA stepped up to help make mortgage insurance available to millions of qualified home buyers across the nation. 80 years ago, Congress actually designed the mortgage insurance fund to do just that.

To prove how crucial the FHA is, the National Association of Realtors put together a testimony before the Senate Banking Committee praising the administration. According to NAR President Gary Thomas, without the FHA the housing downturn and economic recession would most likely have been far worse for the nation.

“FHA continues to play a significant role in the housing market and recovery. We applaud them for their leadership and strength during the housing crisis, and for continuing to serve the needs of hardworking American families who wish to purchase a home,” said Thomas, who is also the broker-owner of Evergreen Realty, in Villa Park, Calif.

He also noted that the FHA has always provided access to mortgage financing and it has never offered risky mortgage products, used predatory lending practices, or engaged in exotic underwriting. However, the FHA incurred great financial losses as a result of overall market conditions that led to increased foreclosures.

Despite this, Thomas said that the NAR is confident that the FHA is moving closer to helping to stabilize the mortgage insurance fund, and they've also made many administrative changes to minimize risk. Those changes include five increases to mortgage insurance premiums since 2009, implementing credit score floors, hiring a credit risk officer, requiring higher down-payments for those who have lower credit scores, and putting a series of measures in place to increase their lender responsibility and enforcement.

“FHA currently has one of the strongest books on record and the quality of borrowers has skyrocketed; continued market improvements and rising home prices will also help improve the fund’s future financial condition,” said Thomas. “Had FHA not stepped in to fill the market gap, many families would have been unable to purchase homes, current homeowners would have experienced far greater drops in equity and their home’s value, and our nation’s economy would be much further from a recovery.”

Posted in: economic recovery,federal housing administration,FHA,gary thomas,housing market,NAR,National Association of Realtors,testimony