Rising defaults on FHA loans have led to the FHA’s cash reserves 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.
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.
http://portal.hud.gov/portal/page/portal/HUD/press/press_releases_media_advisories/2010/HUDNo.10-016
*article courtesy of www.CAR.org
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