Low reserves inspire the Commissioner
In an effort to “strengthen the FHA’s capital reserves,” the Federal Housing Administration Commissioner David Stevens announced today big changes.
The FHA will raise the up-front Mortgage Insurance Premium from 1.75% to 2.25%, the second time in two years they have increased the rate, betting on this spike keeping FHA’s coffers stable.
“Striking the right balance between managing the FHA’s risk, continuing to provide access to underserved communities, and supporting the nation’s economic recovery is critically important,” said Commissioner Stevens.
Other changes agents must know about FHA
Now, if borrowers want to qualify for the 3.5% down program, the new minimum FICO score is 580, and for those under 580, they’ll be required to put down at least 10 percent. The FHA will also reduce allowable seller concessions from 6% to 3%, forcing borrowers to have skin in the game.
As the FHA went from insuring 3% of loans to now 40%, they’ve been looked at more closely with raised eyebrows as defaults continue to skyrocketed and they are now below their required reserves.
Yesterday, the HUD and the Treasury vowed to do their part in stabilizing the real estate market, and today, the FHA makes their announcement, with all three experiencing 20/20 hindsight which some analysts say is too little too late. Either way, agents should know about these changes as they navigate the waters of the real estate market.