Following the subprime lending collapse in late 2008, there was a void in financing for low-credit borrowers with little or no down payments. Loans backed by FHA stepped in to fill some of that void, with FHA purchase loans jumping from just 3.3 percent of all purchase loan originations in Q4 2006 to 27.2 percent in Q4 2008.
FHA loans weren’t alone in their resurgence following the fallout of subprime lending. A lesser-known (although long-used) financing instrument called a contract for deed gained traction in the years following the collapse of subprime lenders, particularly for low-value homes in Rust Belt cities like Detroit, Flint, Youngstown and Indianapolis.
Contract-for-deed data recently released by ATTOM Data Solutions shows the trend, as illustrated in this infographic:
Source: ATTOM Data Solutions