Is FHA Tightening Loan Underwriting?
Saturday, April 5th, 2008Some mortgage and real estate industry professionals have been complaining that FHA has tightened the credit underwriting guidelines recently. This is not a true statement, however, there is ample reason for many to feel this way. To examine what is really going on with FHA at this moment, we’ll have to take a step back and look at the entire mortgage market as a whole.
The recent near catastrophe and near miss of financial mayhem with Bear Stearns, a Wall Street firm that survived the Great Depression, has shown us just how vulnerable the mortgage market is these days. Fannie Mae (FNMA) and Freddie Mac (FHLMC) have recently tightened their guidelines. In addition to the 5% Loan-To-Value reduction buyers and borrowers experience with declining market indicators, there are also pricing adjustments in play for FNMA & FHLMC. A borrower with a credit score below 730 and an LTV above 60% will have a pricing adjustment of between .5% and 3%. This translates into higher borrower closing costs.
The result has been a flood of conventional mortgage loans that have been converted to FHA mortgage loans. The recent increase in FHA lending limits has also spurred this conventional to FHA transition.
Now, HUD direct endorsement underwriters are overwhelmed with FHA loan files and as a reaction to this over supply of FHA loans, lenders have raised the credit score and qualifying requirement for borrowers seeking FHA financing. Again, this is not a change with FHA; this is merely a change with many lenders.
So, now that we have that out of the way, let me assure you that the lenders participating in the Seller Helps Buyer program are not subject to this FHA artificially high credit score problem. Simply choose your lender through the Seller Helps Buyer website and relax and enjoy your new FHA mortgage loan.
Search and purchase a pre-foreclosure with an FHA Mortgage Loan