Monday, September 21, 2009

FHA Announces Credit Tightening Policies

The FHA (which insures mortgage lenders against losses) is required by federal law to maintain a supplementary reserve of 2% of the loans it insures. This Friday (September 18th) the FHA announced that they would fall below the reserve requirement and were initiating action. The FHA is confident that they can control the situation through several measures. The FHA assured the press and the public that the shortfall WOULD NOT affect the premiums borrows pay or the current 3.5% down payment requirement.

The Wisconsin Journal Sentinel reported, "Appraisals will be valid for no more than four months, down from six to 12 months previously. The FHA also plans to change rules aimed at averting pressure on appraisers, making them more consistent with those adopted earlier this year by Fannie and Freddie. Mortgage brokers or bank employees paid on commission won't be allowed to order appraisals."

Lenders providing FHA loans will now be required to have 1 million dollars in assets as opposed to the current quarter of a million.

Of concern is that Inman News reported that the minimum consumer credit score for an FHA backed loan would increase from 633 to 693. After much research, I could not find verification from a credible source of this report. I would ask our lending affiliates to verify this through blog comment.