FHA Policy Changes

FHA officials hope that policy changes will ensure borrowers have a stronger equity position and are less likely to default. These policy changes include:

(1) Raising the up-front mortgage insurance premium. The premium will rise to 2.25 percent from its current 1.75 percent. HUD is expected to release a Mortgage Letter on January 21, 2010, making the premium increase effective in the spring.

(2) Raising the mimum credit score requirement. New borrowers will be required to have a minimum FICO score of 580 to qualify for FHA's 3.5 percent down payment program. New borrowers with less than a 580 FICO score will be required to put down at least 10 percent. FHA expects this to take effect in early summer after it goes through the normal regulatory process.

(3) Reduce allowable seller concessions. The agency is lowering the maximum permissible level to 3 percent from its current 6 percent limit. FHA expects this to take effect in early summer.