HUD Toughens FHA Program

HUD Toughens FHA Program
The FHA announced changes to its mortgage insurance program today intended to shore up its capital reserves and increase lender enforcement. FHA Commissioner Dave Stevens said the upfront fee on FHA loans will increase 50 basis points from 1.75 percent to 2.25 percent sometime in the spring, and HUD will ask Congress for the authority to increase the annual fee past its statutory cap of 0.55 percent. FHA borrowers with credit scores less than 580 will be required to make a 10 percent down payment instead of the traditional FHA minimum of 3.5 percent. Some industry observers noted that most lenders aren’t doing business with credit scores less than 620. In addition, HUD will reduce allowable seller concessions from 6 percent to 3 percent and pursue legislative authority to require that FHA lenders indemnify the agency for loans they originate or underwrite.