| For many years, Federal Housing Administration (FHA) | | | | 5. Eliminate the ability to finance the Up Front Mortgage |
| mortgage loans have been helping millions of | | | | Insurance Premium (UFMIP) |
| Americans achieve the dream of home ownership. | | | | 6. Raise the cost of the FHA monthly mortgage |
| During the mortgage "boom," FHA loans lost a lot of | | | | insurance premium |
| popularity because the sub-prime loans were so much | | | | As it stands right now, any loan originator will tell you |
| easier to obtain. Since the proverbial mortgage sky | | | | how much more difficult it is to get approved than it |
| began to fall in 2007, FHA mortgages are back in the | | | | was 6 months ago. Hell, 2 years ago, it seemed like a |
| mainstream and make up a very healthy share of all | | | | cake walk. One of my purchase closings in October |
| loan origination today. | | | | was a client who had a 620 score and I helped instruct |
| Recently, the Secretary of HUD (Housing and Urban | | | | her how to get to that level! It was a sigh of relief |
| Development) announced that the FHA mortgage | | | | when that loan closed on time (before the original tax |
| insurance reserve pool had fallen to a level of 0.53%, | | | | credit had been extended) since most lenders are |
| much less than the federally mandated 2% threshold. It | | | | already requiring a 640 FICO now. |
| is no surprise that Mr. Donovan is now scrambling for | | | | It is a shame that the negligence of HUD and its |
| ideas of how to get that reserve back to its required | | | | executives are now punishing the would be home |
| level and thus save his job. Maybe. | | | | buyers to pay for the mistake they made. I am more |
| Here are a few of his groundbreaking ideas: | | | | than confident to say any, if not all, of these proposed |
| 1. Raise the required minimum down payment from | | | | "solutions," are going to severely hinder the ability of |
| 3.5% to 5% | | | | potential home buyers to get approved for a loan. |
| 2. Lower the maximum seller assist from 6% to 3% | | | | These home buyers need the advantages of the FHA |
| 3. Establish a minimum credit score (this was | | | | mortgage loan program to allow them access to |
| implemented by investors already - good luck getting a | | | | achieve the dream of home ownership. Obviously, we, |
| loan done under 580 FICO) | | | | as an industry & a country, need these people to |
| 4. Raise the cost of the Up Front Mortgage Insurance | | | | buy homes. If not, this housing mess we are in is only |
| Premium (UFMIP) | | | | going to get worse. Much worse. |