The Federal Housing Administration, the division of the Department of Housing and Urban Development which insures home mortgages for qualified borrowers, has recently announced pending changes which will affect all borrowers and specific borrowers.
Reports show FHA defaults and foreclosures to be at 18% of the total number of loans where the average number of defaults and foreclosures on other loans is 14%. In an effort to avert the need for a taxpayer bailout there have been several changes initiated and proposed.
Changes that have already been established will be implemented on February 1, 2010 and include changing the required Up Front Mortgage Insurance Premium (UFMIP) to 2.25% from 1.75%. This would immediately help raise funding for the Administration.
Another change which goes into effect immediately includes a series of enforcement enhancements to enforce existing regulations on FHA lenders. Much of this information will be made public on the HUD website beginning immediately and increasing throughout the summer.
A major proposed change would include decreasing the allowed seller contribution, now at 6%, to a maximum of 3%. Their reasoning is because the 6% seller contribution invites artificially inflated appraisals. Additionally it has been proposed to qualify for the 3.5% down payment borrowers would need to demonstrate a minimum middle credit score of 580 or higher or be required to make a down payment of at least 10% of the sales price.
Many of these changes will be available for open comment on the HUD website.
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