[quote=esmith]I think it’s a big misconception. “Tightening lending standards” only apply to private lenders. Government is doing the opposite. You can get a FHA loan of up to $625,000 with 3% down, credit score of 660, and 45% gross DTI ratio. That does not qualify as “tightening” for me. [/quote]
Yes, you are right. In fact, “Government-insured home loans in July soared to 29.1% of all home loan applications, up from 8.4% just 12 months earlier, reports the Mortgage Bankers Association”.
The problem is, if the foreclosure rates continue to increase or even if they hold steady, the FHA is left holding the bag. The FHA has been the only government agency that does not rely on taxpayers for funding, and operates solely on mortgage insurance premiums paid by homeowners with FHA-approved loans.
Of course, the government might change that one day, we will see…
But if the taxpayer money is on hook one day, it is really hard to justify not to tighten FHA loan standards.
