This past Thursday (March 11, 2010), FHA Commissioner David Stevens testified before Congress that an increase in the minimum down payment from 3.50% to 5% would result in 300,000 fewer buyers able to use FHA financing. This translates into a 40% drop in the Housing Market. It looks like FHA is going to stand firm on their minimum down payment at 3.50% and says the increase in the upfront mortgage insurance premium in 3 weeks from 1.75% to 2.25% should be sufficient to correct the shortfall in revenue and keep FHA solvent.
In other news last Thursday, David Stevens said that a .25% to .75% increase in mortgage rates is an acceptable sign of health in the economy. Wow, hang onto your hats if this happens! This of course is not the news that we want to be hearing and I could see that if there is a chill in the housing market because of the increases in rates, we will see the Government again participate in the Mortgage Back Security (MBS) program. For now, this is an excellent time for taking advantage of tax credits, low rates and depressed home prices.
