FHA to Tighten Up Mortgage Standards in 2013
In an effort to make up for a large budget shortfall, the Federal Housing Administration announced it will publish new mortgage standards for certain home owners and replace a popular reverse-mortgage program on Jan. 31, 2013.
As among the changes, borrowers with credit scores between 580 and 620 will face stricter underwriting standards. Such borrowers will face stricter limits on their debt-to-income ratio.
The FHA also will soon require a minimum down payment of 5 percent for high-cost mortgages that exceed $625,500.
FHA also plans to suspend its popular reverse-mortgage option, which allows those 62 years and older to take cash out of their homes in a big, upfront payment, The Wall Street Journal reports. FHA will be replacing it with the Home Equity Conversion Mortgage saver, which offers lower cash payments than the large upfront payment of the other program.
The changes are part of an effort to make up for a $16.3 billion deficit FHA faces. The FHA reverse-mortgage program alone accounts for $2.8 billion of those losses.
Last month, the FHA also announced it would increase insurance premiums.