Major Changes to FHA loan program
Federal Housing Administration (FHA) commissioner David Stevens on Wednesday unveiled a sweeping set of policy changes designed to address risk and strengthen the financial standing of FHA's insurance program, which guarantees FHA lenders against default-related losses.
Among the new changes announced Wednesday, FHA will increase the mortgage insurance premium by 50 bps to 2.25% - from 1.75% - effective in spring through a mortgagee letter.
FHA will also implement a new down payment system where borrowers only qualify for the 3.5% minimum down payment with a FICO score of at least 580. Borrowers with credit scores less than 580 will be required to put down at least 10%. Stevens would not comment on what percentage of FHA borrowers would fall under the latter category.
FHA will also reduce allowable seller concessions from 6% to 3% to make FHA's program consistent with the marketplace and reduce the risk of price inflation at the time of purchase.
Stevens said FHA will seek to increase its enforcement of standards on FHA lenders by first publicly reporting lender performance rankings as of February 1st. This will "hold lenders more accountable" and keep them informed of where behavioral expectations should be within their peer group.
FHA will be pursuing legislative authority to increase enforcement through additional amendment to the National Housing Act that would apply indemnification provisions to all direct-endorsement lenders and would essentially require lenders to assume liability for all loans they underwrite.
Stevens said FHA is also pursuing legislative authority that would permit it to establish separate "areas" for purposes of lender review and termination under the credit watch initiative. This initiative, he said, would let FHA withdraw originating and underwriting approval from a lender nationwide based on the performance of regional branches.
The changes reflect what Stevens stressed are the priorities at the FHA - to get the capital reserve headed back to the minimum requirement, to keep from disrupting the housing finance industry and to support under-served first time homebuyers.
This article was provided by DIANA GOLOBAY
Wednesday, January 20th, 2010
If you would like more information on the FHA loan program changes, please contact Jennifer Manchester at www.JenniferManchester.com.
Jennifer specializes in helping people buy and sell Mint Hill, NC real estate, Matthews, NC real estate and Charlotte, NC real estate