FHA Tightening Underwriting Requirements
Risky home loans led to the 2008 housing crisis and the subsequent Great Recession. Regulators and lenders quickly tightened mortgage-underwriting standards to prevent future crashes. Have we forgotten the roots of the housing crisis in just over a decade?
The Federal Housing Administration (FHA) thinks so and has taken action to reverse trends showing increased mortgage loan risk. As of March 18, the agency amended its automatic underwriting system to mandate that all loans identified as high-risk must go through a separate manual analysis. That's bad news for homebuyers struggling to enter the housing market.
FHA loans are targeted for the higher-risk market, offering low 3.5% down payments to homebuyers with FICO scores of at least 580. Scores as low as 500 may still qualify with a 10% down payment and other mitigating factors. FHA loans also require debt-to-income (DTI ratios) less than 43%, al...
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