On January 20, 2010, FHA announced major changes to ensure its long-term financial soundness. FHA is trying to balance three fundamental objectives: 1) financial soundness of the FHA insurance fund ensuring that its capital ratio returns above 2 percent, 2) fulfilling its mission of serving borrowers not adequately served by the private sector and 3) facilitating the recovery of the housing industry and the over-all economy.
FHA announced changes in the following areas:
The upfront mortgage insurance premium (UFMIP) will increase to 2.25 percent up from 1.75 percent. Contrary to reports, FHA will continue to allow the financing of the UFMIP.
Borrowers with a credit score below 580 will be required to have at least a 10 percent down payment. The minimum down payment will remain at 3.5 percent for all other borrowers.
FHA will seek legislative authority to increase the annual premium (currently capped at .55 percent). Over time, increasing the annual premium may allow FHA to reduce the up-front premium.
Seller concessions will be reduced to 3 percent from 6 percent.
FHA will make the following lender enforcement changes:
FHA will implement credit watch terminations at lender underwriting.
Public reporting of lender performance through scorecard system will be implemented.
FHA will implement, through notice and comment, indemnification against lenders. Indemnification will be expanded beyond fraud and misrepresentation.
FHA will seek legislative authority to enforce indemnifications against direct endorsed (DE) lenders.
FHA will seek legislative authority to sanction lenders nationwide based on performance of local branch.
This is encouraging news for home loans not only for Placerville, (El Dorado County), California, but nationwide. Hopefully, FHA will also reconsider and change or delete some of their recent regulations that have caused negative impacts, plus new loan processing delays.
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Please note blog post date of 1/20/10. They have made many changes since then. Many of them during the past 2 years don’t make sense, in my opinion! Thanks for the comment, Bud Zeller
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