Trouble on the Horizon for San Diego Buyers: FHA Loan Requirements to Get More Difficult?

Are things going to get more difficult for San Diego buyers using FHA loans?

U.S. Housing and Urban Development Secretary Shaun Donovan on Wednesday asked Congress for authority to raise borrower premiums and down payments in order to bring the Federal Housing Administration’s reserves above the mandated 2 percent minimum.

The agency plans to reduce the maximum permissible seller concessions from 6 percent to 3 percent. The minimum borrower FICO score will be raised above the current 500, although the final number has not yet been determined.

It also will likely increase the down payment to 5 percent, but that number hasn’t been decided either.

Donovan also wants lenders to take responsibility for losses associated with loans not underwritten to FHA standards and to be accountable for origination quality and compliance.Critics said tightening up FHA could slow the housing recovery.

"What would cripple the housing market is the FHA changes its down payment requirement," said Rodney Anderson, a broker with Supreme Lending in Plano, Texas, the top individual originator of FHA loans in the country.

Source: Reuters News, Lucia Mutikani (12/02/2009)