FHA New Rules

Posted by Rick Delgado on Tuesday, June 19th, 2012 at 11:39am.

FHA has completely eliminated the recent underwriting changes that they announced on February 28th regarding the need to pay any open collection or charge offs greater than $1,000.  This is HUGE news!!!  Some estimates have come out that up to 20% of loans that were approved last year would NOT have been approved this year, and the industry has been pummeling FHA every since the original announcement. 

On Friday, the word started to sneak out about this change, and the Mortgagee Letter was formally issued yesterday.  IT IS OFFICIAL!!! 

The original rule when announced was supposed to go into effect on April 1, 2012.  FHA then backed off in early April, and postponed the start date to July 1, 2012.  And now, they have done away with it completely.

WARNING:  in response to the FHA rule change on February 28th, several “big banks” and servicing lenders made similar changes to their guidelines.  I expect that many of them will NOT back down from this, even though FHA has rescinded the new rule.  FHA has to listen to and play “politics” while the Wells Fargo’s and B of A’s and the Citi’s of the world are much less likely to bow to pressure.  It remains to be seen which lenders will actually change their rules over the next two weeks back to the way things were.  I am quite certain that several lenders will not change, so make sure when you have FHA buyers with open collection accounts that you ask these questions to the LO that you are working with!!!


Rick Delgado

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