Demand surges for VA, FHA loans

The back-to-the-future trend in mortgages is continuing, as an industry report on government-insured home loans illustrates.

The Mortgage Bankers Assn. said today that Federal Housing Administration and Veterans Administration loans represented 35.9% of new mortgage applications in June, the highest level since November 1990.

Back in August 2005, at the peak of the easy-money era, just 6.8% of mortgage applications were for these federally insured loans. Of course, back then you could get a loan without a down payment, a decent credit score or even an income if you were willing to fudge the details on your loan papers.

The allure of VA and FHA loans these days is that, although they are paperwork-heavy, they require lower down payments than conventional loans, according to the report by the trade group.

--E. Scott Reckard

Comments

[Lou]

The market figured out that 0% down loans were a bad idea and what does our wise government do? Offer 0% down loans. It's like they just want this downturn to go as long as possible.

[Cal]

"The allure of VA and FHA loans these days is that, although they are paperwork-heavy, they require lower down payments than conventional loans, according to the report by the trade group."

For FHA, The other allure is that the underwriting & enforcement have large gaps in them and so fraud is rampant.

[Laker]

Sure, because the government ie TAX PAYERS will foot the bill on all the foreclosures on these FHA/VA loans in the next couple of years....

[sfvrealestate]

Lou, the minimum down here in L.A. is 3.5%.

[Cal]

sfvrealestate:"Lou, the minimum down here in L.A. is 3.5%."

VA is 0 down. And it is still technically possible to get 0% FHA loans its just a lot harder because all the state/city funded DPA programs are out of money.

[michhar1994]

FHA and VA loans basically had nothing to do with the current housing bubble. The maximum loan amounts are in the $300-350K range for these loans. Even at 0% (which would be great in any other market), these loans did not really put people at risk.

True subprime, non-doc loans and their kin (NINJA, Alt-A loans, etc) allowed people to borrow more than they could afford. This was because they could be securitized and sold with no risk to the originator of the loan. That caused the bubble.

FHA/VA loans are great for those who can get them. It is unfortunate that you can't get much for $350,000 in the are of Los Angeles in which I live...

My two cents.

[michhar1994]

Correction-

I had incorrect data on the loan amount in my last post. The FHA limit is $729,750 in LA County as of February 2009.
I apologize.

But I still think that FHA and VA loans were not the culprits in this housing mess, as I stated before.