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October 10, 2008 4:13:27 PM CDT

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Depression-Era FHA Tries to Save Mortgages

Posted Mar 6, 08 1:00 PM CST in Business 

(Newser) – It’s been a while since the Federal Housing Administration was relevant. But now policymakers are counting on the Depression-era agency, which mostly insures mortgages, to once again solve a housing crisis. FHA-insured loans are swiftly becoming substantially cheaper than their Fannie Mae or Freddie Mac backed counterparts. “The FHA’s role is going to be huge,” predicted one mortgage consultant.

In 1934, the FHA could back nearly any home loan around, but in years since it’s been relegated to helping low-income, entry-level buyers. In the stimulus package, Congress reversed course, more than doubling the maximum loan size to $729,750. Competitors accuse the FHA of underpricing, but the agency is just doing it’s job, one official said. "We need to be there as a backstop."

Source Wall Street Journal

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William Reed talks about squatting in vacant houses, Thursday, Jan. 10, 2008, in Cleveland. The nation's foreclosure crisis has led to a painful irony for homeless people.   (Associated Press)
Treasury Undersecretary Robert Steel, left, and Federal Housing Administration Commissioner Brian Montgomery, testify on Capitol Hill in Washington, Friday, Nov. 2, 2007, before the House Financial Services...   (Associated Press)
FHA loans, which have typically gone to first-time and low-income buyers, are now stepping to the forefront as the mortgage industry crashes.   (KRT Photos)
A foreclosure sign tops a sale sign outside an existing home on the market in northwest Denver in this photograph taken on Wednesday, Aug. 29, 2007. (AP Photo/David Zalubowski)   (Associated Press)
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housing market  • housing crisis  • mortgage crisis  • Fannie Mae  • Freddie Mac  • Federal Housing Administration  • economic stimulus  • Great Depression  • mortgage insurance  • FHA mortgage


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