FHA to tighten underwriting, raise premiums

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Multifamily investment properties in MissoulaBid to boost capital reserves also includes changes to reverse mortgage offerings

By Inman News, Wednesday, January 30, 2013. Inman News®

The Federal Housing Administration will issue a series of changes to FHA mortgage programs this week designed to bolster the agency’s capital reserves in the hopes of avoiding a taxpayer bailout.

The changes will limit the ability of some borrowers with low credit scores to qualify for loans, and raise minimum down payment requirements and premiums for borrowers taking out mortgages larger than $625,500.

The agency reported a $16.3 billion deficit in a report to Congress in November, raising the specter that FHA will require a taxpayer bailout next year for the first time in its 78-year history.

The U.S. Department of Housing and Urban Development (HUD), of which FHA is a part, noted the changes in an announcement today:

  • As of April 1, 2013, FHA’s full drawdown reverse mortgage program, the Standard Fixed Rate HECM, will no longer be available to borrowers who seek a fixed interest rate mortgage. Such borrowers will only have access to the HECM Fixed Rate Saver, which “will significantly lower the borrower’s upfront closing costs while permitting a smaller pay out than the HECM Fixed Rate Standard product, thereby reducing risks to the (FHA’s) Mutual Mortgage Insurance Fund,” the agency said. The vast majority of HECM borrowers currently choose the Standard option.

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