In a letter to Senator Corker (R-TN) dated Dec.18, 2012, FHA announced additional changes to "rebuild the reserves of the Mutual Mortgage Insurance Fund." Last month, an independent actuarial audit of FHA showed the economic value of the Fund is negative $13.48 billion. This means that FHA needs an additional $13.48 billion to carry a full 30-years' worth of reserves on its mortgage insurance portfolio. The changes outlined in the letter include:
- Raising DTI for borrowers with low credit scores. FHA will require borrowers with credit scores below 620 to have a maximum DTI (debt to income ratio) of 43%
- Moratorium on full cash out HECM (reverse mortgages)
- Raising the downpayment for loans above $625,500 to 5%
- Greater oversight on borrowers who are trying to obtain a new FHA loan 3 years following a foreclosure.
FHA will issue guidance by Jan. 31, 2013 to implement these changes. NAR has urged the Administration and Congress to use restraint when making changes to the FHA program - which remains a vital part of our nation's economic recovery.