It is now well known that the Sub-Prime Mortgage Industry is tightening up on their underwriting requirements, and that many loans that were easily underwritten just a few weeks ago are no longer available. So much for old news and what can’t be underwritten any longer, so now it is time to move on to what mortgages can be underwritten.
Conventional Loan programs, at least here in Connecticut are still proceeding the same way as they have been for years, and will continue to provide mortgages to people with good credit. But what about the people with credit that needs a little “Tender Loving Care”? Well it seems that an old time mortgage source will soon be “Stepping Up To The Plate” and taking care of some of those needs. This old time mortgage source is FHA, and changes are underway to help fill in some of the gaps that have been created by the recent changes to the Sub-Prime Market.
Unlike Sub-Prime Mortgages, FHA Mortgages are fully backed by the Federal Government, thus giving FHA Mortgages a solid secured base. FHA Mortgages do have limitations that the Sub-Prime Market did not have, such as Stated and No Money Down Programs, Loan Sizes, as relaxed regulations on credit issues. But efforts are underway in Washington to fill some of those gaps. There is currently legislation to increase the FHA Loan Limits to that of Fannie Mae ($417,000), and also moving closer to 100% Financed Loans. As far as relaxing credit requirements, FHA is a lot more relaxed in that area already then most people realize. Unlike Sub-Prime and even some Conventional Loan Programs, FHA is not FICO score driven. FHA Loans are underwritten under what FHA refers to as a “Total Scorecard”. That means FHA looks at an Applicants full credit history and not just the Credit Scores. FHA looks at employment, nontraditional credit, and does not automatically disqualify someone because of a bankruptcy. FHA will consider “Compensating Factors” such as the reason for credit problems like medical and loss of employment.
So while some doors have been closed by recent changes in the Sub-Prime Industry, FHA is “Stepping Up To The Plate” to at least alleviate some of holes that have left behind by Sub-Prime. FHA is trying to change it’s hard to do business, bureaucratic, red tape, snail like processing ways of the 1980’s and 1990’s. The changes that started to take place at the beginning of 2006, appear to be continuing towards a friendlier, we want your business FHA. Stay tuned for these changes, and others that will still make it possible to do some of hard to do loans.
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Info about the author:
George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com
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