ORLANDO, FL-Sooner or later, mortgages insured by the Federal Housing Administration may once again become the loans of last resort for borrowers who can't qualify for conventional financing. But for now, they are king.
That's the word from Jacksonville mortgage broker Patrice Yamato, who led an entry-level course on FHA loans at the Florida Association of Mortgage Professional's annual convention here earlier this month.
Indeed, FHA loans are "just about the only low downpayment product in town," said Yamato, who was FAMP's president in 2006.
Private mortgage insurers are trying to get back into the game with 5% down programs of their own, she told the class. But they are taking a "very conservative" approach.
While the standard income ratios are about 31% for housing debt and 43% for total debt, Yamato said she's seen applications approved where the backend ratio is as high as 55%-56% for borrowers with good credit scores and some assets.
The long-time loan broker-Yamato has been in the business since 1981 and has owned her own company, Plaza Mortgage Group, since 1995-said the only thing different about FHA lenders now than when she started originating them nearly 30 years is that there are a few more forms.
Otherwise, the program has deviated very little from when the mortgage insurance agency was created by Congress in 1934. "It was, 'If you make it, show it to me' then and it's 'if you make it, show it to me' now," she said.
Only a few years ago, though, the agency's share of the market slipped to less than 5%. So the government came to lenders and asked what it could do to make the program better. And then, when the market cratered, FHA's share of originations increased to more than 30%.
Now that FHA commissioner David Stevens is on record as wanting to turn down the volume, Yamato said it's likely that underwriting rules will be tightened. But even at that, she told the class of mostly brokers who are not yet originating government-insured loans, it is an excellent program, even if it is full of acronyms.
