Due to rising defaults, the Federal Housing Authority???s (FHA) reserves have been depleted.?? Congress mandates that the FHA maintain 2% of its outstanding insured loans in reserves.?? The FHA is opting to raise fees in lieu of jumping on the tax payer bailout bandwagon.?? FHA is going to increase the upfront mortgage insurance premium (UFMIP) from its current 1.75% to 2.25%.?? This will be the second increase in as many years.?? FHA is also considering an annual insurance payment fee paid for by borrowers.?? To stave off more defaults, the FHA is tightening its lending criteria.?? Borrowers with a 580 or below credit score will need to put 10% down (though most lenders require a 620 credit score to qualify).?? Borrowers with good credit will still be able to put 3.5% down. ??Another way it???s addressing defaults is fighting inflated purchase prices from sellers.?? Sellers will only be able to credit 3% of the home???s purchase price (down from its current 6% level).??
FHA currently backs up nearly half of all loans originated in certain distressed markets (California being one).?? This means the FHA is largely responsible for keeping the housing market moving and facilitating its recovery.
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Source:?? Nick Timiraos, Wall Street Journal ???FHA to Lift Mortgage Insurance Fees??? Jan. 19, 2010
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