FHA Market Share Tops 36%, New Record

In news that should come as no surprise to anyone, the Mortgage Bankers Association is reporting that in June government-insured loans - meaning FHA and VA financing, but mostly FHA loans - represented 36 percent of all loan applications, the largest market penetration since 1990.

In comparison, the lowest recorded market share was 5.8 percent in August 2005.

"A primary reason government-insured loans have retained a high share of the purchase market is that these loans typically require lower down payments than conventional loans," said Orawin Velz, MBA's Associate Vice President of Economic Forecasting. "In addition, lending standards tend to be tighter for conventional loans, especially for loans that require private mortgage insurance." 

Sounds to me like a recipe for a additional foreclosures in a couple of years.