Why the FHA is Going to Send Real Estate Markets in a Tail spin

In the past Real Estate agents would inform the sellers of the cost that could potentially cost them by the tough appraisal format? The appraisers would enter a property with the mindset that they, had to be a Home Inspector and find deficiencies in the home. Some of the problems that the appraisers would call out in their inspections would cause the deals to just fall apart.
The problem was really agents just did not want to go through all of the hoops, when they could just conventional.

The other issue that was brought light in the years, from the late 90’s to 2005 was the sub-prime market had placed a major hit on the FHA loans the market shares went from around 48% of the lower market to just 32% in and around 2004. Since the FHA seen this fall taking place the appraisals inspections let up and were no longer calling things such as painting a railing.
Some f the other issues were that the MIP had been reduced. These issues and that FHA was really not credit score driven, made it easier for people to receive a mortgage. Not to mention; the money that the buyer could use could be 100% gifted by a relative.

This made the FHA more attractive to many buyers who never thought they could even purchase a home! Now that things are starting to change around and the market is showing signs of recovering in the real estate market, the experts in Washington are at it again. They want to change what is working and try to break it again, so they can drive the market in reverse.

This brings up another point; the Reverse Mortgage also has MIP “mortgage protection insurance, which at this time has a surplus in the fund and they also want to raise this one at the same time. If all programs are working to help stimulate the market why not just sit back and seen where it goes!

The biggest problem; is that the people in Washington who are making these changing are the same people that got us here in the first place. Now I can see maybe raising the down payment to maybe 5% of the purchase price, but to limit the seller contribution this is something that has helped more people own a home than any single issue in real estate. The closing cost and using some of the money maybe to buy down the rate can make the difference in a home selling for more money or even selling at all in and all ready struggling market.

In professional opinion as an Exclusive Buyers Broker for over 15 years, this has been the difference in a sale in many cases. The buyer may have the money for the down payment but fall short when it comes to the closing cost. In some areas of the country like in Florida where the buyer and seller have to pay a mortgage tax and the intangible tax these can significant additional fees to the buyer.

If you want to get the markets flowing again then we need to come up with creative ways to make the sale, and providing these additional items does make the difference. This few but significant changes in the FHA/HUD will have a dramatic impact on real estate markets around the country and send the real estate markets back into a tail spin.
You would think since the FHA has seen a dramatic increase in the market shares that they had lost over the years with stupid issues just to close that they could come up with a thought process that would keep the continuing up swing working.