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One of my biggest pet peeves is the phrase I often hear bandied about that ‘FHA is the new subprime.”
No, it isn’t. And knock on wood, it never will be. FHA does provide an opportunity for borrowers who have had credit problems to get a loan. But the differences between FHA doing that and subprime loans doing that are that FHA requires common sense from the underwriter and FHA holds the lender accountable for their default rate. There isn’t an arbitrary rule that says “OK, you’ve been late 1×30 on your mortgage in the last twelve months, so you qualify. We don’t care why it happened, or whether the situation is likely to happen again in the next 3 months. You fit the matrix, you get the loan.”
