According to an April 8 article in American Banker, the Federal Housing Administration will likely be backing a lot less residential mortgages in the future, and analysts say that could have a negative impact on housing recovery.

FHA insured almost 40 percent of purchase mortgages in 2010, accounting for about $200 billion in loans, and much of that market has been first-time homebuyers. But the latest government figures indicated FHA backed only $8.3 billion in purchase mortgages in February, just under 47,000 loans. That is a decrease of 36 percent from the same time last year.

American Banker also reported that FHA raised its annual premium by 25 basis points in October 2010 and will raise it another 25 points April 18. Brian Chapelle of Potomac Partners in Washington told American Banker that FHA’s decreased role and the elimination of refinances as interest rates go up will “expose the weakness of the purchase market.”

FHA, along with Fannie Mae and Freddie Mac, guaranteed 2.1 million purchase mortgages in 2009 and 1.9 million in 2010, but those numbers stand to drop substantially in 2011, something Chapelle called “truly troubling.”

With buyers already leery of a still shaky market and banks requiring more stringent financing requirements, the National Association of Home Builders is also concerned about housing recovery. The U.S. Census Bureau reported a drop of 17 percent in new home sales in February, the largest drop since 1968 when the government first began tracking home purchases, Appraiser News Online reported March 30.

Analysts Keefe, Bruyette & Woods told American Banker the average credit score for a home buyer taking out an FHA-insured mortgage in 2008 was 633, but in the fourth quarter of 2010 that score rose to 701.

While NAHB chief economist David Crowe told American Banker he is optimistic about overall economic recovery in the U.S., he’s not so sure about housing. He said economic recovery “usually lifts housing, but the mechanics aren’t working this time.”