Loan Modification

FHA Walks a Thin Line

By Gina Pogol

FHA’s mandate, combined with today’s economic conditions, makes conducting its business a lot tougher than it used to be. On one hand, its job is to keep home ownership a viable dream for many less affluent American residents — who are under more pressure than ever. On the other, FHA has been self-supporting since its inception — until recently, and it needs to get on its own feet and off taxpayers’ backs as soon as it can. Finally, it must balance its books but not at the expense of those most deserving its help — credit-worthy people whose modest incomes makes saving a large down payment extremely difficult. FHA’s proposed changes, some which will go into effect very soon, are intended to do just that.David Berenbaum, Chief Program Officer, National Community Reinvestment Coalition, stated yesterday that, “?The changes announced today by the FHA represent an attempt to navigate a prudent course without negatively impacting access to credit or contributing to a further slowing of the housing market in communities of color. While borrowers will bear more of the costs of the government insurance program through higher premium charges, the additional revenue will help ensure that FHA stays solvent. The burden to the individual borrower is modest and should ensure, overall, that borrowers have access to responsible credit. While some less credit worthy borrowers will need higher down payments, this is a necessary move in markets where a decline in home value can wipe out a new buyer?s equity within weeks after the settlement.”

If you are one of those less credit worthy borrowers, you either need to buy as soon as possible, or take what I consider a wiser course and improve your financial health. It’s probably easier for most people to improve their credit scores to 580 or better than to save a $20,000 down payment for a $200,000 house. If you can’t complete a home purchase within two months, spend the next six paying your bills on time, then pull a credit report and see how much your score has improved. Who knows? By forcing you to be more financially responsible before buying a home, FHA is probably doing you a favor.

Full post as published by FHA Mortgage Guide on March 05, 2010 (boomark / email).