At the risk of revealing my age, I'll share that the first home my bride and I owned was purchased for $10,700. It was new and nice, but a modest two-bedroom home located in my hometown of Des Moines, Iowa. We financed it with an FHA home loan.

In those days, a majority of home financing was done with mortgages insured by the Federal Housing Administration (FHA). But later the popularity of these loans dropped dramatically, largely due to restrictions on FHA home mortgages; they just weren't competitive with offered conventional mortgages.

Today, however, FHA loans are experiencing a strong revival. Certain restrictions and loan limits have been lifted, making them attractive to people purchasing a home or refinancing an existing mortgage in many parts of the country.

About 29 percent of all July mortgage applications were for government-insured loans (FHA and VA mortgages), according to a report on Lenderlicense.com. The share of these mortgage applications has tripled since July of last year. FHA refinance applications increased by 317 percent over the past year.

In July and August, lenders originated $47.9 billion in FHA loans, nearly topping the $54.3 billion created over the previous three months, the report stated.

"FHA mortgages are now our fastest growing products," said Scott Stern, CEO of Lenders One, a major mortgage company. "Now we are almost 48 percent conventional and 48 percent FHA mortgages. The FHA insurance program has not raised its fees or tightened its underwriting standards, as Fannie Mae and Freddie Mac have, along with private mortgage insurance companies."

A bit of FHA history:

During the Great Depression in the early 1930s, the banking system failed, causing a huge decrease in home loans and homeownership. Most mortgages were short-term, like three to five years, and were no more than 50 or 60 percent of a home's market value. The banking crisis forced most lenders to retrieve due mortgages, and refinancing was usually unavailable.

To address the problem, in 1934 the federal banking system was restructured — the National Housing Act passed and the Federal Housing Administration (FHA) was created. Its intent was to regulate the rate of interest and terms of mortgages that it insured. The new practices increased the number of people who could afford a small down payment on a home and monthly debt service payments on a mortgage, thus greatly increasing the number of potential home buyers.

Over the years, the FHA program has experienced its ups and downs, but it has served a major role in pushing homeowner rates very high in this nation. Today, it's serving as a viable option, particularly for persons purchasing their first home, or those needing to refinance into a more manageable loan.

VA mortgages — loans guaranteed by the Department of Veterans Affairs — are also picking up steam. Lenders originated $8.2 billion in VA loans in July and August, compared with $10.4 billion during the previous three months, the report noted.

Q. How is the GSE takeover affecting mortgage interest rates?

A: As predicted, mortgage interest rates dropped substantially since the highly publicized government takeover of the GSEs — Fannie Mae and Freddie Mac. The rate at this writing is below the benchmark 6 percent level, and analysts point to more reductions in coming weeks.

Not surprisingly, mortgage applications are up sharply, particularly refinance mortgage loans.

"Interest rates for 30-year fixed-rate mortgages are down almost 0.6 percentage points over the past four weeks," said Frank Nothaft, chief economist for Freddie Mac. "The lower rate will spur home purchases and loan refinancing in coming weeks. This means that the monthly principal and interest payment on a new $200,000 loan is over $76 lower than a month ago."

In the wake of lower mortgage rates and decreasing home prices, more prospective buyers are taking action to seek out and purchase a home. The most active groups in the current market are young adults and minorities, according to one study.

"Renewed financial concerns should keep long-term Treasury yields low and translate to lower mortgage rates in the near term, despite some widening in mortgage spreads," said Orawin Velz, a vice president of the Mortgage Bankers Association. "We expect to see meaningful increases in mortgage demand in coming weeks on both the purchase and refinance sides."

Q. Is it OK to rent a house that's in danger of foreclosure?

A: A warning has been issued to renters by the National Multi Housing Council to beware of certain housing being offered for rent. About 40 percent of those homes are actually in some stage of foreclosure, and renting such a property could result in the renter "losing everything," according to a Council report.

The Council recently released a brochure entitled, "Rent from the Pros," warning consumers about the dangers they might face. For more information, visit: www.nmhc.org/goto/professional/.

To find out more about Jim Woodard and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.

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