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In a move to shore up the FHA's beleaguered balance sheet, Commissioner David Stevens on Wednesday announced big changes at the government mortgage insurer that now backs about half of all home loans to the nation's minorities.
The FHA will raise the up-front Mortgage Insurance Premium, paid by borrowers, from 1.75 percent to 2.25 percent as well as request legislative authority to increase the maximum annual MIP that the FHA can charge. This is the second time in two years that it has raised the premium.
“Striking the right balance between managing the FHA’s risk, continuing to provide access to underserved communities, and supporting the nation’s economic recovery is critically important,” said Commissioner Stevens in a written release.
In addition, in order for new borrowers to qualify for the 3.5 percent down payment program, they will now be required to have a minimum FICO score of 580. Borrowers with a lower score will be required to put down at least 10 percent.
In previous interviews with CNBC, Commissioner Stevens said he wanted borrowers to have more "skin in the game," and this is clearly a means to that end. Some mortgage bankers had been concerned about a proposed change that would prohibit borrowers from financing the up-front premium, but that is not included in this announcement.
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