In an effort to help FHA better manage risk; several proposed policy changes were announced today by Federal Housing Authority Commissioner David Stevens. The purpose of these proposed changes is to help strengthen the FHA’s capitol reserves while addressing risk management.
Follow the FHA Policy Changes link to see the complete press release. A summary of the proposed policy changes are:
• Increase the Mortgage Insurance Premium (MIP) to 2.25%. ETA Spring 2010
• Update the combination of FICO Score (Credit Score) and Down payment Percentage for new borrowers. ETA Early Summer 2010
• Reduce Seller Concessions (Closing Cost Contribution) from 6% to 3%. ETA Early Summer 2010
• Publicly Report Lender Performance Rankings and hold lenders more accountable.
• Increase monitoring of lender performance and compliance with FHA guidelines.
• Loan Originators and Underwriters would assume liability for loans they originate and underwrite.
So what do you think of these proposed changes? How do you think they will effect buyers and sellers?
The first thing that will need to happen is for agents and their mortgage brokers to be up to speed on the policy changes once FHA decides what they will be. When completing the FHA Exhibit, agents need to be sure to use the new up front percentage instead of the old one of 1.75% and they must know how to calculate the total closing costs to be paid by seller so that they do not exceed the allowed amount, especially if the amount of seller concessions allowed it is lowered so drastically to 3%. I think these changes will prevent some buyers from being able to purchase, but it will likely also weed out some of the brokers that have been causing problems in our industry. It seems to me that, as agents, we should help our clients understand these potential changes so they can make the decision to purchase now, while they still can!
All good points Dori. I think it is also interesting that originators and underwriters will assume liability for their actions.