Loan originations by the Federal Housing Administration dropped almost 30% for the 2011 fiscal year (which ended September 30). Part of the drop is attributed to lower demand, but lenders also say that tighter lending standards have been a factor.
FHA loans are popular for many first-time buyers because of typically lower credit and down-payment requirements than at a traditional lender. (The FHA loan portfolio has performed very well; it’s one of the few government programs that generates revenue.)
For 2012, though, FHA might see a further decline in new loans, thanks to the reduced loan limits that went into effect October 1. NAR and VAR continue to lobby Congress to restore the higher limits that had been in effect since 2009.