FHA Low on Funds, Raising Mortgage Insurance Premiums
Low reserves inspire the Commissioner
In an effort to “strengthen the FHA’s capital reserves,” the Federal Housing Administration Commissioner David Stevens announced today big changes.
The FHA will raise the up-front Mortgage Insurance Premium from 1.75% to 2.25%, the second time in two years they have increased the rate, betting on this spike keeping FHA’s coffers stable.
“Striking the right balance between managing the FHA’s risk, continuing to provide access to underserved communities, and supporting the nation’s economic recovery is critically important,” said Commissioner Stevens.
Other changes agents must know about FHA
Now, if borrowers want to qualify for the 3.5% down program, the new minimum FICO score is 580, and for those under 580, they’ll be required to put down at least 10 percent. The FHA will also reduce allowable seller concessions from 6% to 3%, forcing borrowers to have skin in the game.
As the FHA went from insuring 3% of loans to now 40%, they’ve been looked at more closely with raised eyebrows as defaults continue to skyrocketed and they are now below their required reserves.
Yesterday, the HUD and the Treasury vowed to do their part in stabilizing the real estate market, and today, the FHA makes their announcement, with all three experiencing 20/20 hindsight which some analysts say is too little too late. Either way, agents should know about these changes as they navigate the waters of the real estate market.
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This article published on Thursday, January 21st, 2010 at 12:01 am | Contact the editor
Topics: News
About this Columnist (Full Profile)
AGBeat Editor-in-Chief: Lani, named one of Real Estate’s 100 Most Influential, as well as 12 Most Influential Women in Real Estate, is a business writer hailing from the great state of Texas in the city of Austin. As a digital native, Lani is immersed not only in advanced technologies and new media, but is also a stats nerd often burried in piles of reports. Lani is a proven leader, thoughtful speaker, and vested partner at AGBeat.
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- realdiggity:
FHA Low on Funds, Raising Mortgage Insurance Premiums: comments http://bit.ly/5dzkth
- Jeff Royce:
@agentgenius FHA Low on Funds, Raising Mortgage Insurance Premiums http://bit.ly/5P1ZwK
- AgentGenius:
#agnow I thought it was also interesting that loan originators and underwriters where going to be held liable for t… http://bit.ly/8atPuO
- Trenda Carlisle:
@agentgenius FHA Low on Funds, Raising Mortgage Insurance Premiums http://bit.ly/5P1ZwK
- AgentGenius:
#agnow I cant imagine what a rate buy down would cost on a 580 right now, I was saying to Lani when writing this 62… http://bit.ly/8atPuO
- Tim Cahill:
Buying a home or condo using FHA financing? RT @agentgenius FHA Low on Funds, Raising Mortgage Insurance Premiums http://bit.ly/5P1ZwK
- AgentGenius:
#agnow Larger down payment is good. I really feel that the down payment is a measure of how capable the buyer is a… http://bit.ly/8atPuO
- Richard M. Johnston:
FHA Low on Funds, Raising Mortgage Insurance Premiums http://tinyurl.com/yz6qrzu
- AgentGenius:
#agnow I was working with a buyer who had a 615 credit score and he was told to get lost! I'm inclined to go with S… http://bit.ly/8atPuO
- FHA Defaults Surpass 9% – Impending Doom or Just Predictable?:
[...] but some argue that recent FHA measures are self interested as they also have taken measures like raising mortgage insurance premiums to fill their drying coffers. Meanwhile, numerous lenders are being stripped of their ability to be [...]
- AgentGenius:
#agnow [...] but some argue that recent FHA measures are self interested as they also have taken measures like rais… http://bit.ly/8atPuO
Benn Rosales
Conal Campbell
Elijah May
Lani Rosales
Tara Steele
Marti Trewe
Charlene Jimenez
The changes for credit-challenged borrowers are interesting. I mean, are there banks actually lending to people with 580 scores? Not around here. Even the brokers in my area are requiring a 620 minimum.
I cant imagine what a rate buy down would cost on a 580 right now, I was saying to Lani when writing this 620 is pretty much the true bottom. But knowing what FHA can actually do is wise especially if you’re working with first home buyers, at least then you can go to bat for a client, but they may not want that rate!
I thought it was also interesting that loan originators and underwriters where going to be held liable for their actions on the loans they originate and underwrite. Can you say a higher level of accountability?
Larger down payment is good. I really feel that the down payment is a measure of how capable the buyer is as far as keeping the mortgage in good standing and the house afloat. I really feel that the low or no down payment programs just end up hurting everyone.
-Tyler
I was working with a buyer who had a 615 credit score and he was told to get lost! I’m inclined to go with Stephanie on the credit score issue…heck my lender is telling me 640 minimum!
Sounds like FHA is trying to get into the ‘Conventional’ arena.