FHA Considering “Tightening the Belt” – do not make it harder for buyers to borrow!
The FHA reserves are below the required minimum, and here are some of the Housing and Urban Development (HUD) Secretary Shaun Donovan’s recommendation to correct that issue:
- Raise the required minimum down payment from 3.5% to 5%
- Lower the maximum seller contribution from 6% to 3%
- Establish a required minimum credit score
- Eliminate the ability to finance the Up Front Mortgage Insurance Premium (UFMIP) into the loan
- Raise the cost of FHA mortgage insurance (higher premiums)
According to Vicki Cox Golder, President of the National Association of REALTORS, "FHA’s decline in reserves is in part a reflection of a projected change in home price values, and is not tied to excessive increases in defaults or unsound underwriting practices." In citing the recent FHA audit, Golder said, “If FHA makes no changes to the way it does business today, the reserves will actually exceed 2 percent in the next several years. FHA has sufficient reserves.”
Let’s discuss a little history of the FHA (Federal Housing Administration).
Created in 1934 to help our country recover from the Great Depression, the FHA encourages growth of our housing market and stabilizes it during difficult times. It has helped millions of people enter the home-ownership market who would otherwise never be able to afford to own a home.
So when our country is in a state of recession and continued unemployment, the FHA is considering making it more difficult to purchase a home??? Leave the requirements as they are so that FHA financing can continue to do what it was intended to do - make more affordable mortgage financing available to homeowners.
Lori Cain is a residential Realtor with Chinowth & Cohen Realtors serving the greater Tulsa Oklahoma area, including midtown Tulsa, Owasso, Broken Arrow, Bixby, Sand Springs and Jenks. Please visit Lori's web site, LoriCain.com or call 918-852-5036.
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Lori is a residential Realtor with Chinowth & Cohen Realtors serving the greater Tulsa area and specializing in downtown Tulsa and midtown Tulsa real estate.
Lori, I will second your thoughts on that! To place additional levels on the home buyer, is to decrease the pool of home buyers. What on earth are they thinking?!!
Jane, it's CRAZY! How are we suppose to build the reserves if a significant number of Buyers will be EXCLUDED from using FHA financing? And WHY is NAR not screaming about this?
That is one more thing to send the housing market down the tubes again. However, let's hope this is just a threat and not a promise.
Lori--You make a good point here. FHA was set up in 1934 to encourage home ownership and help our country dig out of the Great Depression. Now we are digging ourselves out of a Giant Recession and it is not time to make it harder for buyers to qualify for FHA loan. And why isn't NAR lobbying about this? Perhaps we the members need to speak up. Thanks.
Jane - it's not a threat - I've been talking to too many Lenders.
Mary - Giant Recession is exactly right. And if you go to the NAR web site, you have to HUNT for this topic, because the home page is splattered with goofy stuff about how GREAT the housing industry is right now. It's absurd that they're not screaming about this!
Lori--I will speak to our local board president to make her aware of this issue. Mary