How FHA Mortgages May Burden US Tax Payers
Although the FHA has proven to be a valuable resource to both new homebuyers and individuals with less than perfect credit history, there is some concern that the administration is actually putting an unnecessary burden on average taxpayers.
Chief among these concerns is the fact that the single-family mortgage guarantee program went from a net savings to actually costing taxpayers a substantial amount of money as a greater than expected number of defaults began to occur. These guarantees made during the 20 years between 1992 and 2012 are expected to cost $15 billion despite initial estimates that these loans in particular would result in a $45 billion savings. When combined with lower than expected returns on the homes that have been sold after defaulted loans, the net result is a $60 billion cost to taxpayers.
While this is definitely cause for concern, there is some reason for optimism as mortgage guarantees made between 2010 and 2012 are estimated at this time to produce a savings. Unfortunately, because there are only a few years of performance to judge so far, this savings is by no means a sure thing.
With these high costs being passed on to taxpayers, it should come as no surprise that increasingly strict regulations are being put in place to prevent more defaulted loans from taking place in the future. From stricter lending standards to requirements regarding a borrower's ability to pay, it may be difficult for new homebuyers and individuals with less than perfect credit to qualify for a home loan moving forward that was in the recent past. For example, there are new lending guidelines which would require borrowers to have a debt to income ratio no higher than 43%, compared to the previous 55%.
When combined with rising housing costs throughout the country as the market continues to improve, it is becoming difficult for low and middle class families to qualify for a home loan. Fortunately, with improvements in the mortgage guarantees made over the last few years by the FHA, there is reason to hope that this situation will turn around and that the housing market in general and the FHA particular will be back on track when it comes to helping less qualified individuals achieve their dream of homeownership.
For interested individuals, this means that they will need to take the time to carefully look at their personal finances and options available before they actually begin the process of shopping for a new home.