FHA Announces Tighter Lending Requirements
To strengthen its reserves at a time of rising foreclosures, the Federal Housing Administration on Jan. 20 announced that it intends to raise mortgage insurance premiums, increase downpayment requirements for those with FICO scores below 580 and reduce allowable seller concessions from 6% to just 3%.
The first step will be to raise the mortgage insurance premium (MIP) by 50 basis points to 2.25% this spring and request legislative authority to increase the maximum annual MIP that the FHA can charge. If this authority is granted, then the second step will be to shift some of the premium increase from the up-front MIP to the annual MIP.
Other changes will likely go into effect by early summer.
Responding to the agency’s actions, NAHB sent a letter to HUD Secretary Shaun Donovan seeking a meeting to discuss ways to ensure that the policy changes do not impede the ability of the FHA to insure loans for viable mortgage borrowers in the near term and over the longer run.
"NAHB understands the need for the FHA to respond to developments in its portfolio that will enable the agency to continue to operate on a sound financial footing,” said 2009 NAHB Chairman Joe Robson. “At the same time, the FHA is an indispensable source of financing for America’s home buyers and must fulfill this vital mission at this fragile juncture. NAHB looks forward to working with the agency to ensure that it maintains its central role in the nation’s housing finance system and provides homeownership opportunities for millions of creditworthy borrowers."