FHA, a formerly obscure federal agency, is now at center of many plans to fix the housing market.  (This was a really good article on what the government is looking to do to help out the struggles of the housing market.)

FHA (Federal Housing Agency) loans in this market will definitely increase. I have already seen several offers from buyers looking to obtain and FHA loan.  So first…what is an FHA Loan?

The FHA is a New Deal-era agency that helped create the modern mortgage market. The FHA program is intended for mortgage borrowers with weak credit or little or no cash, who may not be able to otherwise get an affordable mortgage.

Borrowers get FHA loans from private lenders, just as they would any other mortgage. FHA offers insurance to cover lenders if those borrowers, who pay a small insurance premium to the FHA every month, default on the loan. The FHA uses those premiums to cover the lender in the event of foreclosure. 

Basically, the loans are guaranteed by the Fed government.

About 150,000 borrowers have refinanced under a new program called FHASecure in the past six months. Launched in September, this program is aimed at subprime borrowers facing steep mortgage rate resets that they couldn’t afford. That volume compares to the total of 425,000 loans the FHA backed in its previous fiscal year.

I will have more on FHA loans shortly….