Industry insiders continue to wisper about FHA loan guidelines that may be tightening up. According to Trust One mortgage banker, Al Pereida, “For all intensive purpose, the FHA home loan is a great option for first time homebuyers who are unable to come up with a 20% down-payment.” Keeping the FHA loan programs alive may be crucial for the housing recovery.” Pereida continued, “If FHA disappears, mortgage professionals do not have a plan-B ready to replace the lending niche.” Most FHA lenders doubt that raising credit scores or minimum home loan down-payments will help FHA’s bottom line in the short term, but is not opposed in principal to raising minimum down-payment requirements.
FHA mortgage rates have stayed below 5% for the last 6 months and millions of homeowners still need a FHA refinance to reduce their loan payment to meet their budgets. Lenders and brokers continue to worry that the HUD may be tightening FHA guidelines right about the same time as the Fed shuts down their program that has kept mortgage rates low by purchasing $1.25 trillion in mortgage-backed securities issued by Fannie Mae, Freddie Mac and Ginnie Mae. The Federal Reserve has said it will wind the program down at the end of March, which could send interest rates up and put downward pressure on prices. Most of the changes Donovan outlined can be made with no additional authority from Congress, and Donovan said HUD expects to provide more details and public guidance on the changes by the end of January. If HUD issues revised FHA guidelines to lenders in January, they aren’t likely to take effect for 60 days, meaning homebuyers have several months before the latest changes kick in. In September, FHA announced new guidelines for ordering appraisals and streamline refinance loans, which take effect January 1st.
In releasing the results of an actuarial study last month that found FHA’s capital reserve ratio has fallen below a 2% minimum established by Congress, an FHA spokesman said that seller-funded assistance loans were the most substantial pool of troubled loans on FHA’s books, with claim rates 2.5 to three times higher than other mortgage loans. HUD has estimated that seller-funded down-payment assistance was used on more than 35% of all home purchase loans insured by FHA in fiscal year 2007, compared with less than 2 % seven years earlier.
