New Changes Announced From FHA
A new set of changes have been announced from The Federal Housing Administration (FHA) in regards to their home loan program. These new changes are aimed to strengthen the FHA’s capital reserves, while enabling the agency to continue to fulfill its mission to provide access to homeownership for underserved communities. The agency hopes that these changes will help the FHA in a better position to manage its risk while continuing to support the nation’s housing market recovery.
With the rising defaults on FHA loans, the FHA’s cash reserves are falling below federally mandated levels. FHA officials hope that policy changes will ensure borrowers have a stronger equity position and are less likely to default.
Some of the specifics with the new policy changes include:
Raising the up-front mortgage insurance premium: The premium will rise to 2.25 percent from its current 1.75 percent. HUD is expected to release a Mortgagee Letter on Jan. 21 making the premium increase effective in the spring.
Raising the minimum credit score requirements: New borrowers will be required to have a minimum FICO score of 580 to qualify for the FHA’s 3.5 percent down payment program. New borrowers with less than a 580 FICO score will be required to put down at least 10 percent. FHA expects this to take effect in early summer after it goes through the normal regulatory process.
Reduce allowable seller concessions: The agency is lowering the maximum permissible level to 3 percent from its current 6 percent limit. FHA expects this to take effect in early summer after it goes through the normal regulatory process.
In addition to the proposed changes,the FHA is continuing to review its overall response to housing market conditions, and continuing to evaluate its mortgage insurance underwriting standards and its measures to help distressed and underwater borrowers through FHA/HAMP and other FHA initiatives going forward.
