Would be a welcome departure and would tend to move the market back to fundamentals.
But, the FHA load in the $300 K’s is a wee bit on the low side for a market like San Diego. Even if FHA loans rise to the $400 K’s, it will still make things tough for bubble areas.
If FHA loans become the fallback loan of choice (and Congress doesn’t bail out bad loan behavior)then it could help move prices back to something sustainable.
If a home in a nice neighborhood costs $500K (which it doesn’t right now) you put $100K down, loan is roughly $400K, the FHA $417K loan could work out. But, we have a lot of price correction before us if this is going to ever make sense.
And not everyone will easily be able to come up with $100K anyway.
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