Sunday, January 31, 2010

On the FHA guidelines changes

Recently the FHA changed their underwriting guidelines. They have increased the up front mortgage insurance premium from 1.75% to 2.25% of the loan, required FICO's under 580 to have 10% down and capped the maximum seller contributions at 3%.

Considering the losses that FHA is facing these are extremely mild changes and will be negligibly felt by the market. The FHA is even looking to soften the blow by getting authorization to increase the monthly premium to a rumored 75bps up from 55bps and then decreasing the up front premium back down to 1.75%.

The lending industry breathed a big sigh of relief that the changes were so minor. The taxpayers on the other hand get to pay for the losses.

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