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A direct consequence was a dramatic increase in default rates on FHA mortgages. We present in Chart 1 Section 203-related foreclosure counts for the period from 1948 to 1961.
“Recent FHA updates have them saving 0.50% on annual premiums in addition to the elimination of post-settlement interest on FHA mortgages effective of January 26, 2015.
21, new FHA mortgages will require lenders to collect interest only on the balance remaining on the date of closing for a home sale or refinancing.
Buyers with low down payments in Portland, Ore., who previously had been limited to FHA mortgages of $362,250, can borrow up to $418,750 under the new plan, $1,500 more than they can get from Fannie and Freddie, which generally require steeper down payments and higher credit scores.
"FHA mortgages can benefit virtually any homebuyer needing a low down payment home loan," Vlachos explained.
The first change Stevens addressed was the increase in the upfront FHA mortgage insurance premium (MIP) for all forward FHA mortgages by 50 basis points to 2.25 percent, which would be effective by mortgage letter in the spring.
As for rooting out fraud that contributes to high loss rates, the obvious solution is to drop the 100 percent guarantee on FHA mortgages. Why not hold banks liable for the first 10 percent of losses on the housing loans they originate, a reform that has been recommended since as far back as the early Reagan years?
This loan-granting model severely limited access to FHA mortgages for black Americans.
The FHA mortgages had an interest rate of 7.48% and were fixed for the entire self-amortizing term of 25 years.
In our analysis we do not identify Ginnie Mae as a bearer of credit risk; instead, we assume that the entire risk of FHA mortgages is borne by the FHA and that the risk of VA mortgages is borne mainly by the VA.
FHA mortgages, moreover, are of the life tenure type; that is, borrowers need not repay the loan until they die or move out of their mortgaged residences (perhaps to nursing homes).
This extra measure of security made FHA mortgages easily tradable.