FHA Takes Additional Steps to Bolster Capital Reserves
Targeted News Service |
As part of a broad effort to strengthen the
"These are essential and appropriate measures to manage and protect FHA's single-family insurance programs" said Galante. "In addition to protecting the
Home Equity Conversion Mortgage Consolidation
As discussed in its Annual Report to
In addition to the HECM consolidation announced today, FHA will announce the following changes in the coming days:
Changes to Mortgage Insurance Premiums
FHA will increase its annual mortgage insurance premium (MIP) for most new mortgages by 10 basis points or by 0.10 percent. FHA will increase premiums on jumbo mortgages (
FHA will also require most FHA borrowers to continue paying annual premiums for the life of their mortgage loan. Commencing in 2001, FHA cancelled required MIP on loans when the outstanding principal balance reached 78 percent of the original principal balance. However, FHA remains responsible for insuring 100 percent of the outstanding loan balance throughout the entire life of the loan, a term which often extends far beyond the cessation of these MIP payments.
Requiring Manual Underwriting on Loans with Decision Credit Scores below 620 & DTI Ratios over 43 Percent
FHA will require lenders to manually underwrite loans for which borrowers have a decision credit score below 620 and a total debt-to-income (DTI) ratio greater than 43 percent. Lenders will be required to document compensating factors that support the underwriting decision to approve loans where these parameters are exceeded, using FHA manual underwriting and compensating factor guidelines.
Raising Down Payment on Loans above
Through a Federal Register Notice to be published in the next several days, FHA will announce a proposed increased down payment requirement for mortgages with original principal balances above
Access to FHA after Foreclosure
FHA will step up its enforcement efforts for FHA-approved lenders with regard to aggressive marketing to borrowers with previous foreclosures and remind lenders of their duty to fully underwrite loan applications. New loans must meet all FHA guidelines.
Borrowers are currently able to access FHA-insured financing no sooner than three years after they have experienced a foreclosure, but only if they have re-established good credit and qualify for an FHA loan in accordance with FHA's fully documented underwriting requirements. It has come to FHA's attention that a few lenders are inappropriately advertising and soliciting borrowers with the false pretense that they can somehow "automatically" qualify for an FHA-insured mortgage three years after their foreclosure. This is simply not true and such misleading advertising will not be tolerated.
Moreover, FHA will work with other federal agencies to address such false advertising by non-FHA-approved entities. Finally, as discussed in its Annual Report to
Continuing Effort to Improve Risk Management
The changes announced this week will further contribute to the efforts made throughout the
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