It's going to get harder to get an FHA loan……
We’ll get more details later today, but it looks like it’s going to get harder and be more expensive to get an FHA loan. A couple of main points to consider:
- FHA is currently losing money by the truckloads, so something has to change.
- The increased FICO scores, larger downpayments and reduced seller concessions will probably weed out a few people, but not that many.
- It will make it more expensive to buy a house FHA.
- At first glance, the part about scrutiny of the lenders seems like it really wouldn’t affect borrowers, right? Wrong, here’s why. If FHA becomes more demanding in terms of their buy back provisions with lenders, guess what, lenders are going to be looking at absolutely every little detail on the loans to make sure that they comply with the guidelines. Your borrower needs to have 12 months on the same job and he’s only at 11.5 months? Sorry, wait two weeks. The paystubs are dated 31 days before application and we need 30 – sorry, got to get another one. The bank statement, well, you get the picture.
I’m working on a post outlining the details of what Fannie is doing next week Saturday with their new guidelines. Fun times…..
Amid rising foreclosures and falling home prices, the Federal Housing Administration is proposing new rules to crack down on lenders and asking Congress for the authority to raise certain borrower requirements, all in an effort to reduce risk to its $685 billion mortgage portfolio.
While FHA Commissioner David Stevens said in an interview on CNBC following that release that the FHA would not need additional federal funding to meet its loan losses, he added that FHA will be looking for new ways to reduce risk.
Those steps will include raising minimum borrower FICO scores, requiring larger down payments, and reducing the maximum permissible seller concession from six percent currently to three percent.
It could also include raising up-front and/or annual insurance premiums, which would require Congressional authority. This is according to the testimony HUD Secretary Shaun Donovan is scheduled to present to the House Financial Services Committee on Wednesday afternoon, obtained by CNBC.
In addition to changes for borrowers, Secretary Donovan is proposing increased lender accountability.
“We will hold lenders accountable for their origination quality and compliance with FHA policies,” Donovan will tell lawmakers.
Gee – do you think they should have done that a long time ago?