Industry NewsMortgage

FHA will tighten up in 2010

Borrowers will need more cash, minimum FICO score

The Obama administration is moving to tighten underwriting standards on FHA-backed loans by increasing the amount of upfront cash homebuyers must bring to the table, raising minimum FICO scores for new borrowers, and reducing maximum seller concessions from 6 percent to 3 percent.The most obvious way to increase upfront cash requirements would be to raise the 3.5 percent minimum downpayment requirement for loans guaranteed by the Federal Housing Administration.A bill introduced Oct. 1 by Rep. Scott Garrett, R-N.J., would raise the minimum downpayment for FHA loans to 5 percent and prohibit financing of closing costs. HR 3706, which has 27 co-sponsors, has been referred to the House Financial Services Committee.Housing Secretary Shaun Donovan, briefing committee members on the administration's plans Wednesday, said there are several ways to make sure borrowers have more "skin in the game" currently under consideration.HUD has "made the decision to exercise our authority ...