FHA Changes the Rules

On January 20, 2010, the Federal Housing Administration – a government insurance company that backs mortgages and refinance loans for lenders that follow its guidelines – changed the rules for home borrowers.

Starting in the spring, borrowers will have to pay more up front to get a loan. The FHA is raising its upfront mortgage insurance premium from 1.75% to 2.25% of the loan amount. (Homebuyers pay for FHA insurance in two ways: through a one-time upfront premium and through monthly insurance payments.) At the same time, the FHA will ask Congress to raise the limit on the amount it can charge for annual premiums.

While tightening requirements for buyers, the FHA is cracking down on unscrupulous lenders responsible for the agency’s growing defaults and shrinking reserves. Officials at the agency – which is growing to become the lender of choice for buyers without perfect credit or those who can’t amass a 20% down payment – feel the changes are necessary because loan defaults have shrunk the FHA’s reserves below required levels. The problem would right itself by 2013 without intervention, but the proposed changes should bring the reserves back in line in the next fiscal year.

To read our previous blogs about the FHA and FHA changes, click here, here, or here.

By: Present Value

Tags: changes, federal housing administration, FHA, rules

This entry was posted on Tuesday, January 26th, 2010 at 3:34 pm and is filed under FHA Loans. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.