A recent interview with FHA commissioner David Stevens on CNBC gives hope to Chattanooga real estate owners with FHA loans. The Federal Housing Administration now covers at least 30% of new home loans, so when Stevens announced that it might not make its 2% capital reserve, people were understandably nervous. For no reason, Stevens says in the CNBC interview.
Instead of immediate risk management in the form of strict guidelines that might make it harder on potential Chattanooga real estate owners, such as those Fannie Mae and Freddie Mac have put on condo mortgages, the FHA is going for some changes. The changes include hiring a chief risk officer and requiring higher capital standards for loan originators.
Once it was out that the FHA wouldn’t meet its 2% (please note that the FHA itself is the one who broke the news), news portals, blogs and other websites spread the news that the FHA was a train wreck. However, the CNBC interview with Stevens cleared the air a bit.
It appears that the FHA, put in place for instances like this when people can’t afford other loans, actually has two capital accounts. According to Stevens, the FHA has “lots of capital in primary reserve to cover expected defaults.” Combined, FHA capital is over $30 billion dollars.
At the present, says Stevens, the FHA isn’t considering a minimum credit score, and they may not have to. Looking at their portfolio, the average credit score has gone up 60 points, from 630 to 690, pointing to a higher quality of borrowers.
So, when thinking about buying Chattanooga real estate and looking at mortgage companies, don’t forget to look at the FHA. If Fannie Mae and Freddie Mac are lending, the FHA is – and it’s going strong!
You can watch the CNBC video for the full interview.
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Keyword/Tag: Chattanooga real estate
Might not make its 2% capital reserve
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