By Paul Davidson | USA TODAY
Riskier borrowers are making up a growing share of new mortgages, pushing up delinquencies modestly and raising concerns about an eventual spike in defaults that could slow or derail the housing recovery.
The trend is centered around home loans guaranteed by the Federal Housing Administration that typically require down payments of just 3% to 5% and are often snapped up by first-time buyers. The FHA-backed loans are increasingly being offered by non-bank lenders with more lenient credit standards than banks.
The landscape is nothing like it was in the mid-2000s when subprime mortgages were approved without verification of buyers’ income or assets, setting off a housing bubble and then a crash. And Quicken Loans, one of the largest FHA lenders, dismisses the concerns as overwrought. Still, for some analysts, the latest development is at least faintly reminiscent of the run-up to that crisis.
