FHA Announces Tighter Restrictions On Lending

This week the Federal Housing Administration announced tighter restrictions will be placed on lending requirements.  This is being done in the hope of reducing risks and strengthening the nations’ financial health.  FHA Commissioner, David Stevens outlined a set of policy changes that will enable the agency to fulfill its mission to provide access to home ownership for undeserved communities.

These changes are the most recent in a series enacted by the Commissioner in order to place the FHA in a better position to manage its risks.   In addition to these changes proposed today, the FHA is continuing to review its overall response to housing market conditions. They will also continue to evaluate its mortgage insurance underwriting standards and its measures to help distressed and underwater borrowers through FHA/HAMP and other FHA initiatives. The Federal Housing Administration will also publicly report lender performance rankings to improve transparency and accountability.

The changes proposed are:

• Borrowers must pay an increased upfront mortgage insurance premium (MIP) of 2.25 percent of the loan amount.
• FHA requested legislative authority to increase the maximum annual MIP so it can reduce upfront costs for prospective home buyers.
• Borrowers with poor credit, a credit score of 580 or below, must make a minimum down payment of 10 percent (up from 3.5 percent).
• Seller credits for closing costs are cut by 50 percent and cannot exceed 3 percent of the purchase price.
• FHA will continue to increase enforcement on FHA-approved lenders.

Related posts:

1. California Legislation Tightens Restrictions On Lenders
2. FHA Planning Stricter Loan Requirements
3. FTC Proposes Up-Front Fee Ban for Mortgage Modifications
4. ‘Seasonality Disorder’ In The Housing Market?

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