Recently, Dale Kasler wrote an article that celebrated the rise of FHA loans in the mortgage industry. He noted the rise in FHA loan applications and new initiatives by HUD. The Federal Housing Administration’s loan program,  were nearly forgotten during the years of soaring real estate prices and various no-money-down mortgages, is fueling new lending throughout the Sacramento region.  Mortgage brokers said Monday the FHA program, in which the federal government’s guarantees make loans more affordable, accounts for the vast majority of their business. That’s become increasingly true as credit markets tighten and conventional mortgage guidelines become more restrictive.

Some experts said the FHA’s guarantees are playing a major role in the fledgling recovery in Sacramento’s real estate market.  “This is the best game in town,” said Michael McGee of Winchester McGee Real Estate & Loans in Rancho Cordova. “It’s the only game in town, really.  Jon Kaempfer, a loan consultant with Vitek Mortgage Group in Sacramento, said he does 60 % to 70 % of his loans through the FHA mortgage refinance loan program, “like I did in the old days.”

With conventional lenders demanding down payments of 5 % or 10 %, the 3 % down payment required by FHA has become a bargain. That could make the FHA “the new lender that’s going to deal with risky loans,” said Steven Krohn, an economist and analyst with the Real Estate Group Inc., a consulting firm in Sacramento  “They’ve moved in to kind of remove the financing risk from the banks and the investors.”  At the same time, Krohn said, the FHA program is putting confidence back in the market.  “It’s important that the housing market revive itself,” he said.

The FHA mortgage loan program never went away. But during the boom, market dynamics made the program far less relevant. Borrowers could get mortgages without any down payments. And rising home prices put most deals off limits to FHA guarantees, which were capped at $362,790.  Recent reports indicate that California FHA mortgage lenders have not benefitted much from the increased FHA loan limits, because most banks still consider loans above $417,000 as a jumbo loan and the loan to value restrictions are greater. “Everybody was buying $400,000 or $500,000 homes – you couldn’t do an FHA loan,” said Kaempfer, a board member of the California Association of Mortgage Brokers.

 

 

Last month, North Carolina adopted rules affecting surety bond requirements for mortgage bankers and brokers licensed under the Mortgage Lending Act. The new rules require mortgage lenders, bankers and mortgage brokers to report any claims made against a surety bond within 10 days and to reinstate the bond to the full amount within 30 days. The rules also amended recordkeeping and notification requirements under the Act. The lending rules went into effect on March 20, 2008.

Mortgage brokers and lenders have embraced the increased FHA mortgage loan limits for North Carolina, because so many more homeowners now qualify for government refinance and purchase loans.  In some cases these FHA mortgages actually help stop foreclosures.  Like most states, North Carolina has seen a significant surge in foreclosure activities and short sale transactions.