FHA to tighten mortgage guidelines
As expected, mortgage guidelines for FHA loans will tighten. According to Reuters:
"The U.S. Federal Housing Administration said on Tuesday it will raise the minimum down payment required to secure an FHA-backed mortgage for less creditworthy borrowers as part of a series of steps to shore up the agency's finances. The FHA said borrowers with credit rating scores below 580 would be required to make a down payment of at least 10 percent, while the rate for higher-ranked borrowers would stay at 3.5 percent. It also said it would increase the up-front mortgage insurance premium, which is paid by the borrower when the loan is made, to 2.25 percent from 1.75 percent."
FHA loans have been somewhat unfairly compared to subprime loans but have filled the gap in mortgage lending since the subprime meltdown and the financial crisis. But in a WSJ Developments blog, Nick Timiraos reports that FHA Commissioner David Stevens says:
“While FHA requires minimum down payments and has traditionally served borrowers with less than perfect credit scores, he says the agency’s track record of documenting incomes and offering mostly 30-year, fixed-rate mortgages can’t be compared to the no-money-down, adjustable-rate mortgages with teaser rates.”