Subprime Swoon Sparks an FHA Revival

Lenders hit by the collapse of the subprime market are shuffling back to an old faithful: residential mortgages insured by the Federal Housing Administration.

While a number of lenders already make FHA loans, several others, including IndyMac (NDE Quote) and Bank of America(BAC Quote), are starting to make a bigger push into FHA lending.

"Because underwriting has tightened so significantly, you're going to see people turning back to FHA to get first-time buyers into homes," says Kurt Pfotenhauer, the senior vice president of government affairs for the Mortgage Bankers Association. "We do think we will see some increase in FHA volumes in the coming year."

The news comes as banks and other mortgage companies struggle to replace the outsize profits made in recent years by lending to home buyers with less-than-pristine credit. ...