The Federal Housing Administration and African-American Homeownership

Fannie Mae and Freddie Mac set the stage for a revival of the PMI industry in the early 1970s as they sought to purchase high-LTV (loanto-value) mortgages. Because their charters required that the high-LTV mortgages have mortgage insurance, private mortgage insurers had a steady stream of business. [...]it was expected that the FHA's massive fund that ensured Section 203 mortgages was "unlikely to meet its statutory capital requirements by the end of" the 2009 fiscal year.75 It soon appeared that the fund was in great distress, with "[a]ll of the annual books-of-business from 2000 through 2008 are expected to result in net losses over the life of the loan guarantees, but the largest losses will be from the 2004-2008 books. Because FHA-eligible households have the option of renting, the benefits and drawbacks of an FHA mortgage to a household should be compared to renting as well as to other mortgage products that might be available to them. [...]the experience of the CAP homeowners cannot be generalized to all lower-income borrowers over this same period because the type of financing used is a key determinant of the financial trajectory of investing in a home.