Question:

How are non FHA mortgage lenders affected by the recent mortgage crisis?

Answer:

The recent chaos in the subprime market has affected FHA mortgage lenders less than subprime lenders. Since FHA loans were designed to protect lenders when extending money to low and average income homebuyers, FHA mortgage lenders have come a little astray after the popularity of subprime lending increased. Due to the automated underwriting and relaxed requirements to subprime borrowers, FHA loans had lost popularity, but low income borrowers turning to non FHA mortgage lenders have become a strain on the mortgage industry since many of them defaulted on payments and many lenders are forced into foreclosures. A single foreclosure may cost the lender tens of thousands!

Thus easily gained approval of subprime loans has cost a lot to non FHA mortgage lenders and is causing chaos on the real estate investing and lending community.

Hence, FHA is undergoing modernization attempts in order to help through subprime lenders and borrowers. The purpose of modernizing FHA is offer a better option than subprime loans, and improve homeownership chances to low-income Americans, including underrepresented minorities, and the homeless and the elderly.

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