While many call for the Federal Housing Authority (FHA) to reduce its presence in the mortgage market, it would not be a wise move with purchase loans as low as they are. MHProNews has learned from nationalmortgagenews, even though much of the housing market news is encouraging, only 2.3 million purchase loans were originated in 2011, according to data from the Home Mortgage Disclosure Act, and figures from 2012 show little improvement. Federal Reserve Governor Elizabeth Duke says, “The purchase market is at the lowest levels since the 1990s.” Activity in the purchase mortgage market is nearly 50 percent below that of 2000, and 23 percent below 2008 levels. Currently the government backs around 90 percent of the mortgage market. In particular, lower income and younger homebuyers are the hardest hit. Gov. Duke says, “From late 2009 to 2011, the fraction of individuals under 40 years of age getting a mortgage for the first time was half of what it was in the early 2000s.” Now 13% lower than even the pre-bubble level of 2000, FHA purchase activity has declined 34% since fiscal 2010. Returning the FHA share of the market to 10-15 percent would cut FHA purchase activity to less than 50 percent of the current volume, and restrict home-buying to the wealthier who can qualify for a mortgage. Such a move would increasingly shut the door on creditworthy families’ ability to buy a home, and likely turn the economy back on its head.
