New FHA Loan Standards

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While I was holding an open house this weekend at our 66 Pamela Drive listing in East Petaluma I came across an interesting article on the Wall Street Journal website by Jennifer Waters titled “FHA Gets Tougher on Mortgages“. The Federal Housing Administration, FHA, insures home mortgages made by FHA approved lenders. According to the article the FHA uses its reserves to cover bad loans and in September 2008 they had $19.3 billion in reserves which has fallen to $3.5 billion now.

It’s this falling reserve and the want to “preclude a tax payer bailout” that has prompted the FHA to get stricter on its loan standards. I view this as a double edge sword for the public. On one edge of the sword you have the government and the FHA being proactive to stymie a tax payer funded bailout. Nowadays that’s a breath of fresh air. On the other edge of the sword this will likely make it more expensive for the general public to get an FHA loan adding a small stumbling block to an already slow recovery.

Be sure to check with your mortgage or loan consultant to see how these new rules can affect you.