FHA has made several moves recently in an effort to raise the standards and FHA loan requirements for FHA lenders offering single-family home loans. Most insiders believed that the Federal Housing Administration had targeted single family homes because of the FHA loan defaults. However, for the first time in nearly forty years, FHA announced they would be tightening FHA guidelines for multifamily home loans. Menzo Case, the president and chief executive of Seneca Falls Savings Bank in upstate New York said, “We’re not surprised by anything nowadays.” Among the new FHA requirements, the government agency is poised to elevate the debt service coverage ratios while reducing the loan-to-value and loan-to-cost ratios. FHA is very popular for consumers seeking a 1st time home buyer loan.
Will FHA Loosen Loan Requirements for Borrowers?
According to George Kaganovich, a mortgage banker from iServe Lending in California, “Each time FHA tightens the guidelines it seems to pinch consumers as fewer borrowers have the opportunity to refinance into a better loan.” Kaganovich continued, “Many homeowners have come to depend on FHA for fixed rate refinancing so hopefully things will get easier for them soon.
FHA is also requiring additional verification of a property’s financial performance, an expanded review of the borrower’s credit and the pre-screening of certain mortgage applications to prevent certain loans that may not make ever close, but would create a bottle-neck in the processing departments. Many FHA loan companies see these guideline changes as major obstacles for struggling borrowers, but they understand why FHA has raised the standards.