By Bill Grasska, Teles Financial/ www.telesfinancial.com

FHA loans are consuming America. They are the fastest growing segment of the mortgage market. FHA was designed to help spread home ownership. The new guidelines now allow for a loan amount of up to $729,000.

First time buyers, low income, low credit score, low 3.5% down payment…wait a minute; are we talking about subprime loans? The hyper inflated real estate market was caused by the ease of credit; the ability for a borrower to borrow beyond his or her means.

Would you make a real estate loan to someone with spotty credit, high debt to income ratios with hardly any down payment? No of course not! No one would, but “Hello Federal Government”!! They issue mortgage insurance in the form of an FHA loan that basically allows borrowers to purchase homes beyond their means.

Now guess what? All those banks that we bailed out earlier this year, that’s right, they all are making lots and lots of these loans. Good news is they are making lots of money to pay back the TARP funds!  Bad news is these loans are at substantial risk to default!

Most people think that FHA is a good idea, and for the most part it is.  Except we are not in a normal market! If the real estate market continues to weaken, and national employment figures do not improve, we have just added or another trillion dollars or so to the subprime problem!!

Let’s look on the bright side. You say, “Is there one?” Well I can answer that with a definite and emphatic, “Yes!”

With the Federal Government ready to pour as much money as is needed (to date no one really knows how much has been spent) into the economy to keep it from imploding, it is a good bet that they will keep funding FHA loans until the real estate market comes back.

For more information, please contact Bill Grasska at 310-442-4040 or email him directly at bgrasska@telesfinancial.com.

Filed under: Uncategorized on July 17th, 2009