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FHA Guideline Panic!

Posted by Rob Spring (Loan Officer) on Wednesday, February 18th, 2009 at 3:04pm.

In response to the Obama Housing Relief Plan - Virtually every major FHA investor has increased minimum credit score requirements for FHA loans to 620 middle score.

 I'm sure most of you are asking yourself why...well it will depend on who you ask as to how that's answered.I'll give you my 2 cents and you can take if for what it's worth.  As more information comes available I'll do my best to post.  I believe it's investors lashing back at the terms of the housing plan announced today earlier today.

First: it will allow for loan modifications via a Federal Judge - which indirectly forces loan servicers and mortgage holders to accept loan modification agreements.  Modifying terms of an original agreement causes that loan to loose value in it's portfolio. 

Second: it mentions provisions of lifting Fannie Mae and Freddie Mac's loan limits and 80% Loan to Value restriction.  Yes, most of you know Fannie and Freddie already loan more than 80% but PMI is required that's how they get around it.  This will allow Fannie and Freddie to compete better with FHA for higher loan to value loans.

There is a ton of speculation right now and we'll see how it all shakes out in the next couple of days.  However if the higher credit score requirement is made permanent, it will greatly affect the number of prospective buyers in the market.  This, in my opinion will prolong the housing troubles many areas across the US currently experience.

If you have any questions regarding mortgages or the mortgage market feel free to contact me: rspring@southwestfunding.com.  We offer real-time closing costs are rate estimates here.  You may also visit my personal site: www.swf-mortgage101.com.  Thanks for reading I hope it helps. - ROB-

1 Response to "FHA Guideline Panic!"

Mike A. wrote:
I agree with you but in addition to prolonging the current housing troubles, I believe these modifications could be simply a quick band-aid as many of the modifications are only reducing the rates for say 3 years, but then going back up to the original rates. If the income remains consistent for a borrower and they cannot afford it now, how will they afford it once that modification expires. It could potentially be another major increase in foreclosures as it could have the same effect as the ARM's had when they adjusted.

Posted on Thursday, March 12th, 2009 at 9:45 PM.


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