FHA Reinstates Manual Underwriting for Some Riskier Loans

Posted To: MND NewsWire

FHA is reversing an earlier decision to remove the rule requiring manual underwriting for mortgages with credit scores below 620 and a ratio of debt to income above 43 percent. The decision, conveyed to lenders earlier this month, was presaged in the Fourth Quarter 2018 report to Congress regarding FHA Mutual Mortgage Insurance Fund Programs which expressed concern about the risk posed by recent originations. The report, submitted in February by Keith N. Becker, Deputy Assistant Secretary, Office of Risk Management and Regulatory Affairs pointed to a gradual change in the distribution of borrower credit scores. In the 2018 fiscal year the share of 680 to 850 credit scores continued to decline. The average credit score for borrowers fell to 670, the lowest level in a decade. "FHA's credit risk...(read more)

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