FHA Commissioner Restates Commitment to Under-Served Buyers
Posted by John Scott Smith on Mon, Feb 22, 2010 @ 02:29 PM
Over the weekend, John Rebchook of InsideRealEstateNews.com, wrote an excellent piece complete with video links on FHA Chief Stevens' visit and address in Denver, CO.
Now, over recent months, we have been hearing increasingly loud shouts that FHA should tighten its qualification guidelines, and FHA has decided to do just that. However, the FHA was specifically put in place in order to help people that were not being helped by the banks. As part of FDR's New Deal, the FHA was designed to help people of more modest means become homeowners, even when the banks were shoring up their assets which made it more difficult for borrowers to access capital. (Sound familiar?)
Fast forward seventy-eight years, and if FHA reacted to the current housing problem in the same way that other lenders were, by increasing both down payment requirements and credit score requirements, then wouldn't that be effectively pushing out the very people that it was created to help? As someone who follows developments with FHA closely, I've been concerned about this for some time.
Fortunately, FHA Commissioner David Stevens is committed to staying the course. When he spoke in Denver, Stevens said that “Our primary job is to help the under-served buyer in Atlanta, Georgia, or Detroit, Michigan, or New Orleans, Louisiana.” (Emphasis added.)
Now that the insurance premiums have been modestly increased from 1.75% to 2.25% of the total loan, and the minimum credit score in order to qualify for 3.5% down payment has been raised to a 580, the under-served buyer can still get the help that they need, and the FHA can shore up its reserves.
There will still be cries to raise the down payment even more. Critics will say that buyers need more "skin in the game". My hope is that Commissioner Stevens will become a more vocal proponent of letting FHA be what it was established to become.
What do you think? Is FHA on the right path, or should it tighten its requirements, further?
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