New FHA Insurance Fund

The Perfect Room
New news for homebuyers and sellers, the FHA has announced a plan to secure the solvency of the Insurance Fund. There are a number of ramifications of this plan and some are predicting that the end result will once again be a slow down in the housing market which had just begun to see a little lift in the last year.

One of the big changes that we’ll be seeing is an end to the first time homebuyer tax credit. Not an entirely shocking announcement as this tax credit was so generous it was pretty clear that it would not be permanent.

Another change will be that the government’s purchase of mortgage backed securities will end. In 2008 almost all loans in the secondary market were bought by the government by stepping out of the market, mortgage rates are almost certain to rise, causing a whole slew of repercussions.

To make matters a little bit worse guidelines are being tightened on loans. The goal is to lessen defaults but it will ultimately mean fewer people can purchase a home and the qualifications will be more stringent.

Of course this is just the FHA’s announcement about their plan, it’s not a certainty at this point but it does seem fairly certain that things will go forward.

Creative Commons License photo credit:?Kamal H.