Survey: Zero-Down Loans Would Boost FHA

The addition of zero-downpayment mortgages to the Federal Housing Administration's product line would result in a major boost in single-family originations, according to a survey of 61 lenders commissioned by the Mortgage Bankers Association.The survey by the Hollister Group found that 69% of lenders expect the introduction of a zero-down product would result in a "significant" or "major" increase in FHA originations. Only 5% of lenders said it would have no impact on FHA business. Congress is considering FHA reform legislation that would allow the agency to insure zero-down loans and charge risk-based premiums. The report -- "Lender Perspectives on FHA's Declining Market Share" -- also found that lenders view FHA single-family loans as a "good option" for many homebuyers with marginal credit. However, lenders noted that the FHA has higher origination costs and longer processing times than conventional loans purchased by Fannie Mae and Freddie Mac. In addition, lenders don't feel they are adequately compensated for the indemnification risk they incur with FHA loans. The association can be found online at http://www.mortgagebankers.org.