Will HUD reduce FHA’s 3 year foreclosure seasoning requirement?
According to HUD Secretary Shaun Donovan, the FHA will continue to require borrowers to wait 3 years after their foreclosure before they may consider obtaining a new mortgage loan.
Senator Bob Corker urged Donavan, during a hearing held on December 6th, 2012, to increase the minimum qualifying FICO score for an FHA loan and to welcome conformity in relation to the private market’s general loan parameters and other credit restrictions. While Donavan never directly objected to Corker regarding this issue, he did say, “We are concerned that some of the overlays that lenders are putting on go farther than are necessary. In other words, we do believe that there has been an over-correction in some parts of the market, where we have what are very safe borrowers that are having a hard time accessing credit.”
The FHA is in a very difficult place right now. It appears as though tax payers and new FHA borrowers will be the ones paying for the mistakes made over the years. As for former homeowners who recently experienced a foreclosure, an FHA loan, generally speaking, is most likely the best and only option available.