DISQUS

MDH · 1 year ago

I think what continues to be overlooked by the MSM is just how much liability lenders have now for these loans, including FHA. The Reps and Warrants are much higher now than they were even three months ago. As a lender (or M/I company) I would not want to stick my neck out on these higher LTV loans in declining markets

jlewis44 · 1 year ago

Morgan,
While I have no direct substantiation on this, I have it on good authority that HUD is VERY unhappy with lenders making their own guidelines including FICO requirements and LTV restrictions (I'm not sure about anyone else but Wells has been hitting "Jumbo" FHA's with a 5% declining market reduction and a 660 minimum score).

HUD's take is that you will underwrite to the 4155 without adding restrictions or you risk losing your DE status. We'll see how this plays out as lenders try to tighten while the government tries to increase liquidity.

It makes sense that lenders want to minimize downside risk but HUD is saying that the risk is theirs with FHA insurance and that decision is not the lenders to make.

morganb · 1 year ago

Thanks JL - that is great insight. It is interesting the tension
between the lenders, MI companies (on Fannie/Freddie stuff) and the
government. I'll see if I can dig a bit on that and surface that
issue. Thanks for sharing.

jlewis44 · 1 year ago

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Tiffany Taylor · 1 year ago

If I'm not mistaken...didn't FHA loans have a clause in their guidelines about charging higher rates and fees for low FICO scores?

But to be quite honest, I really think that their needs to be a minimum Fico score on these deals. They are basically 97%-100% financing ( with DPA "down payment assistance programs") for consumers who have clearly demonstrated that they don't value their credit scores and have no problem making late payment etc... Perhaps we should make these loans for consumers with 660 Fico scores + or I would ever feel better if the combined loan to value wasn't at 95-100% in declining markets!
It just feels like another accident waiting to happen, can you say ("major subprime loan")
If us tax payers are going to have to carry Fannie and Freddie on our backs, there is just no room for FHA...