Applications for FHA loans have experienced a slump for the past three years. Applications for these loans have risen a total of 76.8% from December 2006 to June of this year.
Due to the recent uproar in the mortgage market, people are finding FHA loans more appealing. Experts however feel that the FHA program is still in need of improvements, and some feel that these types of loans are a step behind from where the private markets have gone.
Suggested needed reforms include:
-Reduce amount of cumbersome paperwork. Move to automated underwriting. Shorten approval period which can currently take 90 to 120 days.
-Lower down payment requirements. Currently, FHA requires a 3% down payment while others in the market offer zero down options.
-Improve upon audit procedures. These costly audits in order to originate FHA loans are required annually adding up to $6,000-$8,000 per year.
-Approve higher limits. Currently the maximum FHA loan amount is only at $362,790. This amount is not nearly enough to finance a home in the state of California and other higher-cost areas of the country.
Bills to improve the FHA programs that have been presented to Congress have been met with opposition from some lawmakers that feel that the government should not be competing with private lending organizations.
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