NAR Regulatory Issue Summary: FHA CHanges

On January 20, 2010, FHA announced major changes to ensure its long-term financial soundness. FHA is trying to balance three fundamental objectives: 1) financial soundness of the FHA insurance fund – ensuring that its capital ratio returns above 2 percent, 2) fulfilling its mission of serving borrowers not adequately served by the private sector and 3) facilitating the recovery of the housing industry and the over-all economy. What follows is a brief description of the changes and a table with the expected timeline of the announced changes.

FHA announced changes in the following areas:

  • The upfront mortgage insurance premium (UFMIP) will increase to 2.25 percent up from 1.75 percent. Contrary to reports, FHA will continue to allow the financing of the UFMIP.
  • Borrowers with a credit score below 580 will be required to have at least a 10 percent down payment. The minimum down payment will remain at 3.5 percent for all other borrowers.
  • FHA will seek legislative authority to increase the annual premium (currently capped at .55 percent). Over time, increasing the annual premium may allow FHA to reduce the upfront premium.
  • Seller concessions will be reduced to 3 percent from 6 percent.
  • FHA will make the following lender enforcement changes:
  • FHA will implement credit watch terminations at lender underwriting.
  • Public reporting of lender performance through Neighborhood Watch scorecard system will be implemented.
  • FHA will implement, through notice and comment, indemnification against lenders through Credit Watch. Indemnification will be expanded beyond fraud and misrepresentation.
  • FHA will seek legislative authority to enforce indemnifications against direct endorsed (DE) lenders.
  • FHA will seek legislative authority to sanction lenders nationwide based on performance of local branch.


About Max Leaman Austin Mortgage

GREAT RATES, LOW FEES, CLOSE ON TIME™ ---- 2012 Ranked #1 Austin Residential Mortgage Lender (Austin Business Journal) 2010, 2011 & 2012 Five Star Professional (Texas Monthly) 2009, 2010, 2011, 2012, 2013 PrimeLending Chairman's Circle Award 2009, 2010, 2011, 2012 Scotsman Guide Top Originator (Top 200 Mortgage Professionals in U.S.A.) Better Business Bureau "A+ Rating" National Lender Rankings (Scotsman Guide): Top Purchase Volume (No. 10) Most Loans Closed (No. 32) Top Dollar Volume (No. 88)

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