An actuarial report presented before Congress today the FHA’s Mutual Mortgage Fund (MMIF), in spite of gaining $15 billion in the past year, has fallen short $1.3 billion. Currently, the FHA holds more than $48 billion in liquid assets. According to HUD, the MMIF has a current capital ratio of -0.11%, but is now projected to return to the 2% capital reserve ratio required in 2015.
This independent audit also asserted improvements on the part of the FHA compared to last year. The report cited FHA’s underwriting policies, loss mitigation policies, and streamlined short sale program as having a significant impact on the decrease of Early Payment Defaults, delinquency rates, foreclosure starts, and the increase in REO recovery rates.
Preceding the presentation of this report to Congress, FHA issued new guidelines for those lenders that manually underwrite.
Previously, borrowers have been allowed compensating factors if their housing-to-income ratios exceeded 31% but their debt to income ratio was below 43%. The new guidelines set up maximum front and back end rations which are not allowed to be surpassed. These ratios are contingent on the borrower’s credit score.
Those borrowers with scores of 580 or higher however, will be allowed compensating factors: one with a ratio up to 37/47, and two with a ratio up to 40/50. For those borrowers that have a score that is lower than 580, it will not be permitted to go beyond the maximum ratio of 31/43. Exceptions will be made for those borrowers with credit scores lower than 580 if it can be demonstrated that the meet the requirements of the Energy Efficient Mortgage Program, which stipulates a maximum ratio of 33/45.
Anyone who wishes to send comments to HUD on the new guidelines, which will tentatively take effect in March of next year, are encouraged to do so between now and February 10, 2014.
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