FHA Announces Important Underwriting Policy Changes
Because I have received so many inquiries and questions regarding my recent posts on the new HUD/FHA Condominium Guidelines, I thought I would keep our readers apprised on the latest developments over at FHA.
A number of important changes were announced yesterday by the FHA to reduce risk and improve its finances:
- The upfront mortgage insurance premium (MIP) will be raised from 1.75 percent to 2.25 percent.
- The minimum down payment will climb from 3.5% to 10% for applicants whose Fico score is below 580.
- Allowable seller concessions will be reduced from 6% to 3%.
- The FHA also plans to request legislative authority to increase the maximum annual mortgage insurance premium so it can reduce upfront costs for prospective home buyers.
The complete FHA announcement can be found here.
The proposed changes, which apply to all FHA loans, are expected to go into effect in either spring or summer 2010.
Additionally, the agency will continue to increase enforcement on FHA-approved lenders, and will publicly report lender performance rankings to improve transparency and accountability.
Lastly, based on anecdotal information provided by industry persons, I have reported that up to 40-50% of single-family residence loans will be FHA insured in the near future. I read this week in several blogs (but have not been able to confirm through the FHA) that in 2009, 30% of mortgages and 20% of refinances were FHA backed. So my initial estimates may not be too far off.
