FHA just reported a $16.3 billion deficit and announced new changes. What will it mean for real estate investors and how will it change the U.S. housing market?
Clearly the FHA is in serious financial trouble, only adding to the government’s desire to wind it and Freddie Mac down. According to HUD, currently the plan includes trimming the fat and getting rid of many loans and homes while tightening up underwriting and making it more costly to take out FHA loans.
On top of the new FHA rules that recently went into effect, insurance premiums on Federal Housing Administration loans are being lifted yet again, deterring even more buyers from trying to use them to buy homes.
This means they will become less of a staple in the mortgage lending mix and real estate investors may be smart to turn their focus toward more buyers who don’t need FHA loans in 2013.
On the bright side FHA plans to shed 10,000 distressed loans each quarter and many REOs, providing investors with more discounted deals.
The Fed and Bernanke are also increasingly recognizing the perils of the current over correction in the mortgage market and how it has held the housing market back. How exactly the government’s plans to reverse this will play out and how fast will have to be seen. However, banks have been announcing massive hiring initiatives and adding thousands of employees to origination, underwriting and servicing departments, signaling a potential loosening in non-government lending to come soon.
Plus private lenders are becoming more interested in putting money to work with real estate investors due to poor stock and bond returns and a bright outlook for real estate.
So the bottom line is look out for more wholesale deals and watch who your main resale market is. Cash buyers and those with better credit and finances will be able to help you turn properties faster and for more money.