FHA commits to additional tightening Tougher underwriting for borrowers with low FICO scores in the works

Source: Inman News, Tuesday, December 18, 2012.

Inman News®

The Federal Housing Administration has committed to several changes to FHA mortgage programs that, while less drastic than measures proposed by Senate Republicans, will limit the ability of some borrowers with low credit scores to qualify for loans, and raise minimum down payment requirements and premiums for borrowers taking out mortgages larger than $625,000. 

The changes are designed to shore up FHA’s reserves after the agency reported a $16.3 billion deficit in a report to Congress last month, raising the specter that FHA will require a taxpayer bailout next year for the first time in its 78-year history.

Sen. Bob Corker, a Tennessee Republican, announced today that the FHA had committed to change and that in return, he will support Acting FHA Commissioner Carol J. Galante’s nomination to be FHA commissioner.

Corker released a letter from Galante, who promised FHA would “move on” several policy changes by Jan. 31, 2013:

  • Increase underwriting criteria for borrowers with FICO credit scores between 580 and 620 by establishing a maximum debt-to-income ratio.
  • Increase the down payment requirement and the insurance pricing for loans between $625,000 and $729,000 to protect FHA against loss on high balance loans that are outside Fannie and Freddie conforming loan limits and scale back the government’s footprint in the housing market.
  • Crack down on lenders that advertise under the false pretense that borrowers can “automatically” qualify for an FHA-insured loan three years after a foreclosure. Borrowers who have experienced a foreclosure must have re-established good credit and meet underwriting criteria, including the policy change outlined above for borrowers with credit scores under 620. FHA also committed to analyzing whether a foreclosure due to a one-time event, such as a job loss, resulted in a different or better performance than other reasons for foreclosure.
  • Place a moratorium on the full drawdown reverse mortgage program, the Standard Fixed Rate HECM, to assess its viability after $2.8 billion in losses.

In her letter to Corker, Galante said FHA is finalizing a letter to lenders that will require borrowers with FICO scores below 620 to have a total debt-to-income ratio of no more than 43 percent to be eligible for processing through FHA’s automated underwriting system, TOTAL Scorecard. Borrowers with DTIs exceeding 43 percent will have to be processed manually, with lenders documenting compensating factors such as a larger down payment or a higher level of reserves.

Galante said FHA will raise the minimum down payment on loans between $625,500 to $729,000 from 3.5 percent to 5 percent. Since June, FHA has been pricing mortgage insurance premiums for loans in that range at 150 basis points, instead of 125 basis points. Another premium increase announced in November will raise the premiums to 155 basis points — the maximum currently allowed by law.


Maryland Homestead Tax Credit

Make Sure You Reapply! Maryland Homestead Credit

Expires December 31, 2012

If you own a property in Maryland that is your primary residence (you have lived in it for at least 6 months) then make sure you read this!


What is the Homestead Credit?

The homestead credit limits the amount of assessment increase on which a homeowner will pay property taxes in that tax year on the one property actually used as the owner’s principal residence. Legislation enacted by the 2007 session of the General Assembly requires homeowners to submit a one-time application in order to continue their eligibility for the homestead tax credit. See Section 9-105 Tax-Property Article of the Maryland Annotated Code.

Don’t lose this savings!

DECEMBER 31, 2012 is the deadline for filing your Application for Homestead Tax Credit. It does not matter whether you have owned your house one year or twenty years or if you are already receiving the credit. An application must be filed by the end of the calendar year. If your application is already on file and approved, you DO NOT need to reapply.

How do I know if I need to apply?

It only takes a minute to check to see if you have filed and if you are approved. Follow these steps:

Click on this link: http://sdatcert3.resiusa.org/rp_rewrite/  Then Select your County

Enter your street number and street name-do not include Street, Court, Drive, etc.

Look at the bottom of the page and see if your Homestead application was filed-iIf it was filed, the entry will show the date your application was approved.

IF IT SAYS “NO APPLICATION” click on this link for the application:


Also, even after you have filed and been approved, you may not receive a credit on your tax bill. The credits only appear when the assessed value of the property has increased over the allowable limits each year. With declining assessment values, you may not actually receive a dollar credit each year.

To learn more about the Homestead tax credit, click this link http://www.dat.state.md.us/sdatweb/homestead.html

 or reply to this email with your questions!

Please be sure to share this information with your friends and family members that own a primary residence in Maryland!!