According to the Commerce Department’s report, February marked the 8th straight month in which Housing Starts straddled the half-million marker, dating back to June 2009.

This is a different slant on the Housing Starts story as told by [...]]]> Single-family Housing Starts idled last month, dropping just 3,000 units from the month prior, or 0.2%.

According to the Commerce Department’s report, February marked the 8th straight month in which Housing Starts straddled the half-million marker, dating back to June 2009.

This is a different slant on the Housing Starts story as told by the press.

Most publications are reporting that Housing Starts fell 5.9 percent in February. Technically, this is true.  Housing Starts did fall 5.9 percent last month, however, the Housing Starts data is made up of three parts:

1. Single-Family Housing Starts
2. 2-4 Unit Housing Starts
3. “Apartment Building” Housing Starts (i.e. 5 or more units)

The press tends to lump all 3 together but that’s not relevant for everyday homeowners and buyers.

2-4 unit homes, and apartments and condos are a different housing class as compared to single-family homes and are notoriously volatile, too.  Single-family starts are more steady and better reflect the country’s housing stock.

Single-family housing starts are up 32 percent over the last 12 months.

Meanwhile, the pace of new buyers has not kept up with the pace of new housing stock. Therefore, because home prices are based on supply-and-demand, the price for a newly-built home was down, on average, 7 percent nationwide in January.

You’d think this is impossible with all the incentives out there (rates, tax credit, prices). Every client that I come across can’t get into a house FAST ENOUGH and every home has multiple offers on it.

With the federal home buyer tax credit expiring soon, home buyers in San Antonio will likely create new demand for homes. And with Housing Starts holding steady near 500,000, that should push prices higher through the spring months which is GREAT for folks selling their home.

Rates will get bumped up a little bit this afternoon.

Recommend locking all and any transactions with these gains. The Treasury Auction is coming out later today, but I would not suggest risking your purchase/refinance on those results.

MBS is currently up 16bp on the morning and hovering around the 1st level of support.

As for today, there are no economic reports set to come out, so looks like what will be a quiet Monday. (Kind of like what Tim Tebow’s experiencing today…)

2 important days this week are Thursday (Jobless Claims) and [...]]]> Good morning all…

MBS is currently up 16bp on the morning and hovering around the 1st level of support.

As for today, there are no economic reports set to come out, so looks like what will be a quiet Monday. (Kind of like what Tim Tebow’s experiencing today…)

2 important days this week are Thursday (Jobless Claims) and Friday (Retail Sales). On Thursday we will also see the auction of the 3 and 10 year notes, as well as the 30 year bonds.

Stay put and if anything changes, I’ll be back.

CHICAGO (MarketWatch) — House shopping usually slows down in the winter, as people put their home searches on hold to trim the tree, buy presents to put under it and avoid the chilly weather.

This winter, however, might be different, thanks to the extended — and expanded — first-time home-buyer tax credit.

“We’re going [...]]]> By Amy Hoak, MarketWatch

CHICAGO (MarketWatch) — House shopping usually slows down in the winter, as people put their home searches on hold to trim the tree, buy presents to put under it and avoid the chilly weather.

This winter, however, might be different, thanks to the extended — and expanded — first-time home-buyer tax credit.

“We’re going to see far more interest in the fourth quarter than we generally do because of the tax credit,” said Heather Fernandez, vice president of Trulia.com, a real estate search engine. Traffic surged on the site on Nov. 5, the day Congress approved the credit extension, she said.

The new law extends the tax credit for first-time home buyers and opens it up to some existing homeowners as well: The credit is now 10% of the home price, up to $8,000 for first-time buyers and up to $6,500 for repeat buyers. Read more about the home-buyer tax credit on the Internal Revenue Service’s Web site.

All buyers must have a binding contract on a house in place on or before April 30. The sale must close on or before June 30.

To be considered a first-time home buyer, an individual must not have owned a home in the past three years. And to be eligible, existing homeowners need to have lived in the same principal residence for five consecutive years during the eight-year period that ends when the new home is purchased. The credit is only for principal residences.

Income limits have risen as well. According to the IRS, the home-buyer tax credit now phases out for individuals with modified adjusted gross incomes between $125,000 and $145,000, and between $225,000 and $245,000 for people filing joint returns.

Will credit spur more buyers?

The inclusion of move-up buyers might inspire homeowners to take action and list their house if they’ve been putting it off, said Carolyn Warren, a Seattle, Wash.-based mortgage broker and banker and author of the book “Homebuyers Beware.”

“If somebody loves their home, it’s not going to entice them to sell. If they’ve had it on the back of their minds and really would like to move up, it might push them into doing it sooner than later,” Warren said.

The credit isn’t expected to have as large of an effect on move-up buyers as it has on first-time buyers, according to the Campbell/Inside Mortgage Finance Monthly Survey of Real Estate Market Conditions. The maximum tax credit is about 4% of the average purchase price for first-time buyers, but about 2% of the average purchase price for move-up buyers.

“We estimate that the first-time home-buyer tax credit will result in a 10% increase in home sales from March through November of 2009,” said Thomas Popik, research director for Campbell Surveys, in a news release. “We’d expect the effect of the proposed tax credit for current homeowners to be about half as large — from December until the tax credit expiration in the spring of next year, it might be 5% of 3 million transactions, or about 150,000 incremental home sales. Incremental sales to first-time home buyers could be an additional 300,000, for a total of 450,000 incremental sales due to the tax credit extension.”

Tips for buyers

Interested in buying a home and claiming the home-buyer tax credit? Below are five tips:

1. Don’t procrastinate

Get searching now. Getting an early start will give you a better chance of finding the right house before the credit deadline.

“Go out and start as soon as possible. There will be people waiting until the end,” said Pat Lashinsky, chief executive of ZipRealty, a residential real-estate brokerage firm.

When first-time buyers thought the credit would expire Nov. 30, people scrambled to find properties in September and October, he said. In some cases, “there wasn’t inventory that fit people’s needs,” he said. In Phoenix, Chicago and parts of California, for example, some properties even had multiple bidders, Lashinsky said.

Before you start house hunting, get preapproved for a mortgage, said Eddie Fadel, a Miami-based mortgage banker and author of the book “Don’t Rent, Buy!” And do a realistic assessment of what you can afford.

Buyers who have to sell an existing home should price it aggressively from the beginning to drum up interest and get a buyer as soon as possible, Fernandez said.

2. Don’t count on another extension

The credit won’t be available forever, Fadel said. If you want to take advantage, be sure to make that spring deadline.

“This is a medication for the housing crisis. Once the patient — which is the housing market — cures, there will be no medication needed,” he said.

3. Mind the interest rates

Mortgage interest rates are low right now, but will likely rise next year, Warren said. Higher rates will affect your monthly mortgage payments, thus the affordability of the house you are buying.

“It’s pretty universally accepted that rates will be higher next year. What is unknown is how fast and by how much,” Warren said.

Average rates on the 30-year fixed-rate mortgage have been hovering around 5%, but when the government stops buying large amounts of mortgage-backed securities, rates could rise, she said. The Federal Reserve plans to end its purchase program in March.

4. Communicate with your lender

Throughout the process, make sure you’re communicating with your lender regularly; if there’s a piece of documentation you’re asked for, get it turned in as soon as possible, said Doug Heddings, a New York-based real estate agent with Charles Rutenberg Realty. Good communication is important in making sure the loan closes on time.

And think twice before pursuing a short sale if you want to make the credit deadline. That’s where someone sells a home for less than what he or she owes on a mortgage, with permission of the lender. The process can be lengthy and unpredictable because the homeowner’s lender has to approve any deal, and can be complicated when there is a second mortgage associated with the property, Warren said.

5. Don’t take shortcuts

Don’t forgo any of the steps you would normally take just to make the tax-credit deadline. Make sure the house is a good fit for your needs and get a home inspection, Lashinsky said. Skipping steps could cost you in the long run.

“Don’t let the tax credit get you to make a decision to buy a house that you wouldn’t otherwise want to buy,” he said. “Don’t shortcut the process to get the tax credit.”

—-

If you have any questions regarding the revised tax credit, feel free to call the best Houston mortgage lender for details.

Mortgagee Letter 2009-39

TO:                             ALL APPROVED MORTGAGEES

ATTENTION:          Single Family Servicing Managers

SUBJECT:                Updated Claim Filing and Delinquency/Default Reporting Requirements

For FHA’s Making Home Affordable Modification Program (FHA-HAMP)

The purpose of this Mortgagee Letter is to provide updated claim filing and delinquency/default reporting requirements for the FHA Home Affordable Modification Program [...]]]> October 9, 2009

Mortgagee Letter 2009-39

TO:                             ALL APPROVED MORTGAGEES

ATTENTION:          Single Family Servicing Managers

SUBJECT:                Updated Claim Filing and Delinquency/Default Reporting Requirements

For FHA’s Making Home Affordable Modification Program (FHA-HAMP)

The purpose of this Mortgagee Letter is to provide updated claim filing and delinquency/default reporting requirements for the FHA Home Affordable Modification Program (FHA-HAMP).  FHA – HAMP was announced in Mortgage Letter 2009-23, issued on July 30, 2009.

Implementation of FHA – HAMP required system enhancements to both the Department’s Claim System and its Single Family Default Monitoring System (SFDMS).  As with the standard FHA Loss Mitigation options, FHA will include FHA-HAMP Loss Mitigation options in its Tier Ranking evaluation of Loss Mitigation.

Single Family Default Monitoring System (SFDMS) Enhancements:

Both the FHA Connection and HUD’s EDI TS 264 application are now ready to accept two updated SFDMS status codes that mortgagees shall use to report HAMP related loss mitigation actions.  Status Codes 39 and 41 are now available for the industry to begin SFDMS reporting on FHA-HAMP related loss mitigation initiatives.  The specific reporting requirements are outlined in the following section.  FHA recognizes that some industry participants may require additional time to complete the required system changes.  Therefore, mortgagees may begin using the updated SFDMS status codes immediately, but mortgagees must begin reporting the updated status codes beginning with the January 2010 reporting cycle.  That report is due to HUD no later than February 5, 2010, which is the fifth business day of February 2010.

Updated Single Family Default Monitoring System (SFDMS) Instructions

Status Codes 39 and 41 are now available for the industry to begin reporting on FHA – HAMP related loss mitigation initiatives as follows.

• Code 39- FHA-HAMP Trial Modification Plan - Prior to the January 2010 reporting cycle, mortgagees that use the FHA Connection for SFDMS reporting or that have the system capability, will report mortgagors that have been approved for an FHA – HAMP trial payment plan as SFDMS  Status Code 39.  For a limited time, (only through the December 2009 reporting cycle), those mortgagees who are not using the FHA Connection and their systems are not yet ready to support the updated status codes may report the trial FHA-HAMP repayment plan as Status Code 12 – Repayment Plan.

No later than the January 2010 reporting cycle, all mortgagees must report mortgagors approved to begin the FHA-HAMP trial payment plan as SFDMS Status Code 39.

• Code 41 – FHA-HAMP Modification and Partial Claim Started – Prior to the January 2010 reporting cycle, mortgagees that use the FHA Connection for SFDMS reporting or that have the system capability, will report mortgagors that have successfully completed the FHA – HAMP trial payment plan and will begin the process to complete the FHA-HAMP Modification and Partial Claim as SFDMS Status Code 41.

Also prior to the January 2010 reporting cycle, those mortgagees who are not using the FHA Connection and their systems are not yet ready to submit the updated status codes will report the completion of the trial FHA-HAMP repayment plan and the beginning of both the FHA-HAMP modification and Partial Claim as Status Codes 10 and 28 (Partial Claim Started and Modification Started).

No later than the January 2010 reporting cycle, all mortgagees must report mortgagors that have successfully completed the FHA – HAMP trial payment plan and will begin the process to complete the FHA-HAMP Modification and Partial Claim as SFDMS Status Code 41.

Reinstatement of any of the above examples shall be reported as SFDMS Status Code 98- Reinstated.

Appendix 1 to this Mortgagee Letter is an update to Appendix 1 of Mortgagee Letter 06-15.  While there are no changes to Appendix 2 of Mortgagee Letter 06-15, it is reprinted for industry convenience.

Claim System Enhancements for FHA-HAMP:

HUD’s Claim System enhancements are also now available.  The drop-down menu on the FHA Connection screen for Loss Mitigation Claim Input will include additional claim type options named ‘FHA HAMP-Loan Modification’ and ‘FHA HAMP-Partial Claim.’  These new selections will identify Loan Modifications and Partial Claims being filed as part of the FHA-HAMP initiative apart from a standard Partial Claim and a standard Loan Modification.  Mortgagees shall select the appropriate claim type when filing for the FHA-HAMP incentives.  Appendix 3 revises and supersedes the Claim instructions included as Attachment B to Mortgagee Letter 2001-02, and adds specific instructions for filing both the FHA-HAMP-Partial Claim and the FHA-HAMP-Loan Modification.  This means that Mortgagees will actually need to file two separate claims, FHA-HAMP Partial Claim and FHA-HAMP-Loan Modification to receive the incentive payments that are provided by FHA upon successful completion of the HAMP loss mitigation initiative.

Loan modifications and partial claims being filed as part of the FHA-HAMP initiative must be submitted only through FHA Connection to ensure that they are processed as a FHA-HAMP related Loss Mitigation option.  Any FHA-HAMP related claim that is submitted using paper Form HUD-27011, Single-Family Application for Insurance Benefits cannot be correctly processed or paid.

Any questions regarding this Mortgagee Letter may be directed to HUD’s National Servicing Center (NSC) at 888-297-8685 or sfdatarequests@hud.gov.  Persons with hearing or speech impairments may reach this number via TDD/TTY by calling 1-877-TDD-2HUD (1-877-833-2483).

Sincerely,

David H. Stevens

Assistant Secretary for Housing-

Federal Housing Commissioner

Attachments:

Appendix 1 – Delinquency/Default Status Codes

Appendix 2 – Delinquency/Default Reason Codes

Appendix 3 – Claim Filing Assistance for Loss Mitigation Claims

Paperwork Reduction Act

The information collection requirements contained in this document have been approved by the Office of Management and Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520) and assigned OMB control numbers 2502-0060, 2502 and 0429.. Additionally, the Department has submitted an expansion package to OMB for 2502-04249, where approval is pending.  In accordance with the Paperwork Reduction Act, HUD may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection displays a currently valid OMB Control Number.

Pundits love to make predictions as to when home prices will stabilize in U.S. housing markets. But even well-respected forecasters and analysts may disagree, and even if a forecast proves true nationally, your local market may behave in a wildly different way. This disconnect between broad-stroke forecasts and [...]]]>

When will YOUR housing market recover?

The national housing market is more than large enough to encompass a wide variety of trends in different places and on different timelines. And that means, at the end of the day, you’ll need to rely on your own best judgment to make decisions for yourself and your family.

Local data may be more meaningful for homebuyers, sellers
So how can you figure out when home prices and sales hit bottom and begin to recover in your neighborhood? You may need to do your own research to find the answer. Dig up facts and figures about your own city or town and then combine that data with information about national trends to formulate your own conclusions.

Plenty of data are as close as your keyboard, though the process of sifting through it may take quite a lot of time and thoughtful analysis. If you’re tempted to skip out on what may seem like a burdensome homework assignment and instead rely on your own gut instincts, you might want to take a tip from Stuart Gabriel, director of UCLA’s Ziman Center for Real Estate in Los Angeles. He says, “some investors are very instinctual and this has worked out well for them, but most of us rely on the acquisition of information.”

Get your data straight from the original source
For starters, here’s an overview of some of the data and the organizations and agencies that collect and disseminate it:

Supply of for-sale homes a key indicator
If you don’t want to indulge in that much research, zero in on the most important statistic, which, Gabriel suggests, may be the supply, or “inventory,” of homes that are for sale in your local area.

“There is a whole litany (of factors that affect housing) — home sales, housing starts, building permits, house prices — and all of those are important indicators,” he says, “but the inventory numbers in particular are really important.”

The general rule is that more months of supply indicates a weaker housing market. Many months suggests plenty of homes are for sale or the pace of sales is slow. Those conditions are indicative of a market that favors buyers. Few months suggests a limited number of homes for sale or the pace of sales is fast. Those factors are indicative of a market that favors sellers.

Many local Realtor associations and multiple listing services, or MLS, collect and publish this type of information. Ideally, the data should be segmented by locale, type of home and price range, though that degree of specificity is rarely on offer.

Housing starts increase supply of for-sale homes

Two other important housing market indicators are residential building permits and new-home construction starts, according to Gabriel. Bernard Markstein, senior economist at the National Association of Home Builders, or NAHB, in Washington, D.C., agrees. These indicators are measured by local government building officials and the U.S. Census Bureau. A spike in permits or starts may indicate more optimism among homebuilders, but can also suggest a dramatic rise in the supply of for-sale homes in the near future.Housing starts generally are a better leading indicator than housing permits because “housing starts turn into homes for sale very quickly,” Gabriel says.

The NAHB’s Web site offers access to a wealth of forecasts and economic and housing data from the association and government agencies.

Markstein also cites local employment trends and unemployment rates as important indicators of local housing market conditions.

“Employment is important because ultimately people need a place to live, and if people are moving into an area because employment is expanding, that will be positive for homeowners,” he says.

Most local newspapers publish stories about large employers’ hiring and downsizing plans as well as unemployment figures. Employment data also can be obtained from the Bureau of Labor Statistics.

Homebuyers and sellers can also glean useful insights from reports and newsletters published by the Federal Reserve and its 12 district banks, Markstein suggests. Each of the banks puts out its own periodicals about local economic conditions, and these reports usually contain sections about the outlook for commercial and residential real estate. The Fed’s Beige Book and map of the district banks may help you locate these reports.

Quality of data is crucial to good analysis

Much like do-it-yourself remodeling, personal economic analysis is not without certain pitfalls.

It’s important to track inventory, starts, unemployment and other figures over time and compare them to historical highs, lows and averages to understand their importance, Gabriel suggests.

“Look at these numbers relative to the typical level that would exist in a period of economic growth to see whether the levels are aberrantly high or aberrantly low. Look over a long time frame and measure existing levels relative to, say, a long-run average to get a sense of where (the market) is in the cycle,” he says.

And remember: In housing markets, “a long time frame” usually means a number of years, not just a few months.

By Steve Bucci

Dear Debt Adviser, A recent credit score report from TransUnion states that I “have no real estate accounts that can be used in determining a credit score.” Yet I do have a mortgage in good standing with a credit union that does not show up [...]]]> A neat Q & A that I came across today…

By Steve Bucci

Dear Debt Adviser,
A recent credit score report from TransUnion states that I “have no real estate accounts that can be used in determining a credit score.” Yet I do have a mortgage in good standing with a credit union that does not show up on my credit report. Would it be worth the effort to have this mortgage included, and how would I go about doing so?
– Eric

Dear Eric,
Your problem is more common than you might expect, although I don’t usually see it from mainstream lenders. An estimated 15 million consumers in the U.S. have mortgages that are not reported to the credit bureaus, according to Michael Nathans, the founder of Pay Rent, Build Credit, Inc. in Annapolis, Md. Nathans has been working for years to empower consumers with the ability to have their regular bill payments — often referred to as alternative or nontraditional credit information — included in credit decisions. I’ll come back to this later.

I predict that one of the other bureaus will have your mortgage listed. It would be unusual for your credit union not to have a relationship with at least one of the bureaus. It is more likely that the credit union does not have a relationship with TransUnion. So, I suggest you begin by checking your credit reports from the other two major credit bureaus — Equifax and Experian. You can access a free copy of your credit reports annually at www.AnnualCreditReport.com. Review your reports for accuracy and dispute any inaccurate or out-of-date information with the bureau that reported it.

Should you find that your mortgage does not appear on any of your credit reports from the major credit bureaus, I recommend you contact your credit union and ask what its policy is on reporting mortgage loans. Reporting your loan may have slipped through the cracks and once the credit union is alerted, it will be a simple matter of sending in the account activity to the bureaus.It could be that your credit union does not have a relationship with any of the credit bureaus, particularly if it’s very small. If that is the case, the bureaus will not contact your lender for information, and your account will not be included on that bureau’s report. Creditors are not required by law to report information to the credit bureaus, and likewise, the credit bureaus are not required to request information from creditors who do not have a financial relationship with the bureau such as landlords, small or private lenders or many utilities.

Unfortunately, there isn’t a practical way for a consumer to add nonreported accounts or payment histories to their bureau files. In order for accounts to be included in your bureau reports and scores, the source of the information must meet specific requirements under the Fair Credit Reporting Act, including updating a reported account regularly via the bureaus automated reporting system.

Some good news for consumers is Section 202.6 (b)(6) of the Equal Credit Opportunity Act establishes a consumer’s right to present all of his recurring monthly payment history in establishing his creditworthiness, and that information must be considered by a lender if it is available. Nathans, mentioned above, is now working on a Web-based, secure, consumer self-storage application for bill-paying information that should meet this requirement, enabling consumers to present their financial file to any lender and have it scored.

Until that happens, if your account does not appear on any report, I suggest that you keep a copy of your annual mortgage statement from your lender, the one you get for your taxes at year-end. It will show your payments and any fees you may have paid if you were late. Then, you can show any potential lender that you have a mortgage loan in good standing with your credit union that hasn’t been reported on your credit report, and you’ll be able to offer documentation of the loan when applying for credit.

Good luck!

I wanted to repost it so please take a moment to read this, as its VERY [...]]]> In a previous post of mine, I outlined a problem that FHA has been currently dealing with, and today, on the front page of Yahoo, I found an article from the New York Times that gives a nice little update.

I wanted to repost it so please take a moment to read this, as its VERY important.

—-

U.S. Mortgage Backer May Need Bailout
by David Streitfeld and Louise Story
Friday, October 9, 2009

A year after Fannie Mae and Freddie Mac teetered, industry executives and Washington policy makers are worrying that another government mortgage giant could be the next housing domino.

Problems at the Federal Housing Administration, which guarantees mortgages with low down payments, are becoming so acute that some experts warn the agency might need a federal bailout.

Running questions about the F.H.A.’s future — underscored by interviews with policy makers, analysts and home buyers — came to the fore on Thursday on Capitol Hill. In testimony before a House subcommittee, the F.H.A. commissioner, David H. Stevens, assured lawmakers that his agency would not need a bailout and that it was managing its risks.

But he acknowledged that some 20 percent of F.H.A. loans insured last year — and as many as 24 percent of those from 2007 — faced serious problems including foreclosure, offering a preview of a forthcoming audit of the agency’s finances.

“Let me simply state at the outset that based on current projections, absent any catastrophic home price decline, F.H.A. will not need to ask Congress and the American taxpayer for extraordinary assistance — we will not need a bailout,” Mr. Stevens said in his testimony.

But to its critics, the F.H.A. looks like another Fannie Mae. The hearings on Thursday came on the same day that the federal agency charged with overseeing Fannie Mae and Freddie Mac provided a somber assessment of those giants’ health. In the year since the government stepped in to rescue them, the companies have taken $96 billion from the Treasury, and may need more.

Since the bottom fell out of the mortgage market, the F.H.A. has assumed a crucial role in the nation’s housing market. Created in 1934 to help lower-income and first-time buyers purchase homes, the agency now insures roughly 5.4 million single-family home mortgages, with a combined value of $675 billion.

In addition, these loans are bundled into mortgage-backed securities and guaranteed through the Government National Mortgage Association, known as Ginnie Mae. That means the taxpayer is responsible for paying investors who own Ginnie Mae bonds when F.H.A.-backed mortgages hit trouble.

“It appears destined for a taxpayer bailout in the next 24 to 36 months,” Edward Pinto, a former Fannie Mae executive, said in testimony prepared for the hearing. Mr. Pinto, who was the chief credit officer from 1987 to 1989 for Fannie Mae, went further than most housing analysts and predicted that F.H.A. losses would more than wipe out the agency’s $30 billion of cash reserves.

The issue has polarized Congress. Republicans, who led efforts to rein in Fannie Mae and Freddie Mac before those companies ran into trouble, are now seeking to bridle the F.H.A. Many Democrats insist the F.H.A. is playing a vital role in the housing market, which is only just starting to stabilize.

“F.H.A. has stepped into the void left by the private market,” Representative Maxine Waters, Democrat from California, said at the hearing. “Let’s be clear; without F.H.A., there would be no mortgage market right now.”

That was the case for Bernadine Shimon. Like many Americans, Ms. Shimon has recently been through some rough times. She lost a house to foreclosure, declared bankruptcy, got divorced and is now a single mother, teaching high school English in a Denver suburb.

She wanted a house but no lender would touch her. The Federal Housing Administration was more obliging. With the F.H.A. insuring her mortgage, Ms. Shimon was able to buy a $134,000 fixer-upper in August.

“The government gave me another chance,” she said.

The government is giving as many people as it possibly can the chance to buy a house or, if they are in financial difficulty, refinance it. The F.H.A. is insuring about 6,000 loans a day, four times the amount in 2006. Its portfolio is growing so fast that even F.H.A. backers express amazement.

For decades it was an article of faith that helping people of limited means like Ms. Shimon get a house was good for the new owner, good for the neighborhood and good for American capitalism. Then came the housing bust, which demonstrated that when lenders allowed people to buy houses they ultimately could not afford, it hurt the parties — while putting the economy itself in a tailspin.

In the aftermath of the crash, there is wide divergence on how easy, or how hard, it should be to become a homeowner. Skittish lenders are asking for 20 percent down, which few prospective borrowers have to spare. As a result, private lending has dwindled.

The government has stepped into the breach, facilitating loans with down payments as low as 3.5 percent and offering other incentives to stabilize the market. Real estate agents in some hard-hit areas say every single one of their clients is using the F.H.A.

“They’re counting their pennies, scraping up that 3.5 percent,” Bonni Malone of Prudential Americana in Las Vegas said. “Mostly they’re buying foreclosed homes from banks, although I had one client who bought from a guy that was dying. It’s turning around the market.”

While the government’s actions have helped avert full-scale economic disaster, there is growing concern that it might have doled out its favors with too generous a hand.

Many of the loans the F.H.A. insured in 2007 and last year are now turning delinquent, agency officials acknowledge. The loans made in those two years are performing “far worse” than newer loans, dragging down the whole portfolio, Mr. Stevens of the F.H.A. said in an interview.

The number of F.H.A. mortgage holders in default is 410,916, up 76 percent from a year ago, when 232,864 were in default, according to agency data.

Despite the agency’s attempt to outrun its fate by insuring ever-larger amounts of new loans to such borrowers as Ms. Shimon — the current rate is over a billion dollars a day — 7.77 percent of the portfolio is in default, up from 5.6 percent a year ago.

Barney Frank, the Massachusetts Democrat who is chairman of the House Financial Services Committee, said in an interview that the defaults were, in essence, worth it.

“I don’t think it’s a bad thing that the bad loans occurred,” he said. “It was an effort to keep prices from falling too fast. That’s a policy.”

The troubled loans are nevertheless weighing on the agency’s capital reserve fund, which has fallen to below its Congressionally mandated minimum of 2 percent, from over 6 percent two years ago.

The optimism expressed by Mr. Stevens, the F.H.A. commissioner, places him at odds not only with some outside experts but with Kenneth Donohue, the inspector general of the Housing and Urban Development Department, who is also F.H.A.’s watchdog. Mr. Donohue said the drop in reserves was “a flashing red light” that the agency was not taking seriously enough.

“It might be we’ll get ourselves out of this and that everything will be fine, but I don’t paint that rosy a picture,” Mr. Donohue said. “They’re banking on the fact that the economy will continue to improve, that the housing market will begin to sustain itself.”

He noted that if private lenders had raised their down payment requirements in the last two years, it raised the question, “what does the F.H.A. think it is doing by asking only 3.5 percent?”

Any more than that and Ms. Shimon, 45, would still be a renter. As it was, she cashed in her retirement savings account to come up with the necessary funds. She did not have enough to spare for closing costs, so her mortgage broker arranged a deal where the charges were wrapped into the loan at the cost of a higher interest rate. She cried when the deal was done.

The house was empty and trashed. Slowly, she is trying to bring it back to life. She spent the first few weeks picking up garbage in the backyard.

Is Ms. Shimon a good bet? Even she has no easy answer. Her mortgage payment, $1,100, is half of what she takes home every month. It is not easy to make ends meet. Teachers can get laid off like everyone else.

“The government,” she said, “is doing what it needed to do — taking a risk on people.”

Chaz Fullenkamp, an automotive technician in Columbus, Ohio, got an F.H.A. loan even though he was living on the financial edge. “If I got unemployed, I’d be wiped out in a month or two,” he says. Thanks to the F.H.A., however, he is better off than he used to be.

Mr. Fullenkamp used F.H.A. insurance to buy a house this spring for $179,000. The eager seller paid the closing costs and also gave Mr. Fullenkamp $2,500 in cash. He immediately applied for the $8,000 tax rebate. Even taking his down payment into account, he came out ahead.

“I knew in my heart I could not really afford the house, but they gave it to me anyway,” said Mr. Fullenkamp, 22. “I thought, ‘Wow, I’m surprised I pulled that off.’ ”

As the number of loans has soared, random quality control checks have decreased sharply, F.H.A. staff members say. Mr. Donohue, the inspector general, cited numerous examples of organized fraud in testimony to Congress earlier this year.

“They need to stop taking bad loans in the door,” he said in an interview. “They’re taking on all this volume, they have to have very active underwriting standards.”

Jack Healy contributed reporting from New York.

Acceptable situations are:

1.) Instances of divorce, after which the vacating spouse will buy a new home, or 2.) One of the co-borrowers  will vacate the existing property

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