THE 80/20 "BUBBLE"

FHA's market share may be down right now, but be assured that unless HUD wants to get out of the single family origination business, they are just losing a small battle right now and eventually they will win the war.

The primary culprit of FHA's market share decline is 80/20 financing which is built on an actuarial risk model as rock solid as a cliff house on the san Andreas Fault. Despite all the debate over a "housing bubble" and the fact that Real Estate is a historically great investment, common sense tells us that ups and downs are expected.

Real Estate prices will flatten out and decline in some areas in the future and when this happens second mortgage lenders will start racking up losses in a big way. This may take a year or five but it will happen. FHA's risk model, however, is much sounder plus if they lost money they can basically ask the government for more.

So despite increased competition, loan amount ceilings, multitudes of Loan Officers who only understand 80/20 loans for their cash strapped borrowers, and reduced MIP refunds, FHA will survive and thrive in the future after the second mortgage industry pays dearly for the 80/20 craze!