www.lasvegasmtg.com Report: Republicans target increasing FHA Down Payment Part 2
by John Le Francois
www.lasvegasmtg.com Report: Republicans target increasing FHA Down Payment was the main discussion held yesterday in the Republican led House Financial Services Committee. The Draft Legislation "FHA Rural Regulatory Improvement Act of 2011" Chairman Spencer Bachus (R) "This hearing is necessary to insure that government home loan programs do not expose taxpayers to significant losses."
In a previous article "Republican Politicians want FHA to Increase Down Payment" I wrote prior to the House Financial Service Committee hearing briefly outlined the increase from 3.5% to 5% for a FHA down Payment. It appears from testimony from the hearing there would a more restrictions being imposed with the new legislation if the proposal gets out of the Committee.
Micheal Berman Chairman of the Mortgage Banker Association and Ron Phillips President of National Realtors Association are strongly opposed to any increases in the required FHA down payment. Both Micheal Berman and Ron Phillips sited statistics that FHA default are considerably less then conventional loan defaults. What is more important then the amount of down payment is having strong underwriting requirements, which FHA does have.
The Cato Institute a Conservative Think Tank, disagrees and has provided a list of proposed changes that the House Financial Service Committee has eagerly endorsed.
Immediately increase to 5% Cash Down Payments on the part of the borrower.
Require FHA to only allow reasonable debt to income levels. (What that is has not been determined at time of this writing.)
Restrict borrowers eligibility to a credit history above a 600 FICO score.
Require pre purchase counseling for borrowers with FICO scores between 600 to 680.
Require a 10% down for all borrowers with a credit scores lower then 680.
Require income limits on borrowers eligibility to FHA loans to not exceed 115% of the Median Income for the Area.
Are these proposal going to make FHA immune to defaults? No! Will requiring 10% down for borrowers with a a credit score less the 680 protect the FHA loan Program? No! Will not allowing a borrowers ability to use a FHA loan program based on Income exceeding the median income limit strengthen the FHA loan program? No!
The good news is you would be more likely to put the fires of hell out with a squirt gun then this bill ever passing the Senate!