Immergluck and the Evolution of the FHA

Some might like to blame George Bush’s “ownership society,” with its emphasis on homeownership as a cure-all for social ills of all kinds, for the intrusion of the federal government into the housing and mortgage markets. But as Dan Immergluck explains in his recent article, government agencies – particularly the Federal Housing Administration (FHA) – have played significant, and varied, roles in homeownership since World War II.

In the study, Immergluck evaluates the evolution of the FHA, which insures mortgages in order to expand access to mortgage markets for potential homeowners with low credit scores. Immergluck finds that FHA lending was crucial during the 2008 housing crisis, when FHA-insured loans made up 40% of the mortgage market, the highest share since WWII. This peak followed a decline to 4.5% as subprime loans boomed prior to the crisis. Without the FHA, the housing crisis would have been far worse.

Immergluck finds that the likelihood of a mortgage having FHA insurance depends on credit score, regional housing price trends, and neighborhood demographics. Importantly, writes Immergluck, odds increase in predominantly black zip codes.

The study reminds that, though some questioned the need for the FHA as subprime lending proliferated in the early 2000s, the agency was a crucial lender of last resort that was also able to provide stability to local housing markets as the private mortgage industry collapsed. But Immergluck also cautions that his data reaffirm the darker side of the mortgage market that researchers have investigated for years: the resurgent FHA was particularly active in African American zip codes, suggesting that conventional loan originators were avoiding these areas. FHA lending, it seems, is both a blessing and a sign that all isn’t well in the housing market.

hmoroz@uchicago.edu'
Harry Moroz
Harry Moroz is a 2012 MPP graduate of the Harris School of Public Policy.

One Response to “Immergluck and the Evolution of the FHA

  • I agree with Troz. An FHA insured tramgoge is going to be your best bet. The FHA or Federal Housing Authority, is here to insure any higher risk loans like the credit you were speaking of. Most lenders require a 620 credit score or higher, however there are some out there that will go lower than 580. As far as your time line goes, FHA loans can take a bit of time with lower fico scores. One of the things they will take into consideration is what caused the lower scores. If you have any recent derogatory items, it may be harder to get. If in the past 2 years you have had quite a few missed payments you will need extenuating circumstances which basically means something happened at hat point in time that couldn’t be helped such as hospitalization, ect. Good luck!

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