Our Real Estate Blog

January 20th, 2010 6:36 PM
WASHINGTON – Jan. 20, 2010 – The Federal Housing Administration is raising fees and tightening lending standards to shore up its strapped finances and avoid a taxpayer bailout.

The government agency has seen its losses rise with the foreclosure rate. Its reserves have sunk below the minimum level required by Congress. A healthy FHA is vital for the housing market because it insures roughly 30 percent of new loans, and is the largest backer of mortgages to first-time buyers.

The changes, which will go into effect in the first half of the year, “are among the most significant steps to address risk in the agency’s history,” FHA Commissioner David Stevens said in a prepared statement.

The FHA does not make loans, but rather offers insurance against default. Borrowers are willing to pay for the insurance because FHA loans only require down payments of 3.5 percent of the purchase price – and that didn’t change.

The new policies, to be announced Wednesday, are designed to bring more revenue into the agency, while at the same time keeping loans available.

Under the changes, homebuyers will:

• Pay an upfront mortgage insurance premium of 2.25 percent of the total loan amount, up from the current level of 1.75 percent. A borrower taking out a $200,000 mortgage would pay a $4,500 fee, for example, rather than the current fee of $3,500. Borrowers will still be able to wrap these fees into the total amount borrowed. FHA officials also plan to ask Congress to increase the maximum annual premium that FHA can charge.

• Need a credit score of at least 580 to qualify. Many FHA lenders already require a higher score, but there had been no standard requirement across the program. Borrowers with a score lower than 580 will need a down payment of at least 10 percent.

The changes come as borrowers with loans backed by the agency have increasingly been falling into default. More than 18 percent of FHA borrowers are at least one payment behind or in foreclosure, compared with 14 percent for all loans, according to the Mortgage Bankers Association.

Mortgage lenders “will find the new rules painful but necessary,” said Howard Glaser, a mortgage industry consultant and former housing official during the Clinton administration.

There also have been fears that unscrupulous operators have shifted their business to the FHA after the subprime business went bust. Last week, the agency served subpoenas on 15 mortgage companies with suspiciously high default rates for FHA loans, part of a broad crackdown on dubious lenders.

The agency has already taken action against several problem lenders. One of the nation’s biggest mortgage bankers, Taylor, Bean & Whitaker Mortgage Co. of Ocala, Fla., was banned from the FHA program in August and filed for Chapter 11 bankruptcy protection. Another mortgage company, Lend America, was kicked out in November.
Posted by Lori Neighbors on January 20th, 2010 6:36 PMPost a Comment (0)

Subscribe to this blog
Recent Posts:
Archive:
My Favorite Blogs:
Sites That Link to This Blog:

 

 

Lori Neighbors, REALTOR®, CDPE®, Broker/Owner

Full Service Realty

"We'll sell your home for as low as $2995!" , "Full Service with $avings!"®

 Each Office Independently Owned and Operated.

 *Commissions are not set by law. All commissions are negotiable. Any comparisons to a commission percentage, such as 6%, are for illustration and comparison purposes only. The information herein is deemed to be accurate, but not guaranteed. All information should be verified. Fees will vary for Homes in excess of $200,000, call for details. A fee of $395 may apply.

 


Assist2Sell Full Service Realty 14985 Old St. Augustine Road Suite 112 Jacksonville, FL 32258
Phone: Toll Free Phone: Fax:

Contact Us | Free Home Valuation | Assist2Sell FAQ's | Assist2Buy FAQ's | A2S Corporate | Hope 4 Owners | Home Buyer Checklist | Tell a Friend | Browse Listings | Home Page | MLS Property Search | Site Map | Calculator Toolkit | Home Price Index Tool

Copyright © 2012 Assist2Sell Full Service Realty
Portions Copyright © 2012 a la mode, inc.
Another XSite by a la mode, inc. | Admin Login| Terms of Use| Site Map
All rate, payment, and area information are estimates and approximations only.