Magazine article Mortgage Banking

MBA Supports Raising Down Payments for FHA Loans over $625,500

Magazine article Mortgage Banking

MBA Supports Raising Down Payments for FHA Loans over $625,500

Article excerpt

* On March 8, the Mortgage Bankers Association (MBA) sent a comment/letter to the Department of Housing and Urban Development (HUD) supporting its proposal to decrease the maximum loan-to-value (LTV) ratio for Federal Housing Administration (FHA) loans of more than $625,500.

HUD sought comments on a proposal to change the maximum LTV from 96.5 percent to 95 percent on these high-balance loans. If adopted, the change effectively would raise the down payment from 3.5 percent to 5 percent for FHA-insured loans of more than $625,500.

MBA's comment letter stated the group supported the policy change for two reasons--because it would: "1) Refocus FHA's single-family program on its historical core mission of providing access to credit for first-time, minority and low- and moderate-income borrowers; and 2) encourage the return of private capital to the nation's housing market in line with FHA's own efforts to shrink its footprint."

The comment letter notes that MBA's data shows that nationally applications for government-insured loans for more than $625,500 (the bulk of which are FHA loans) represent well under 1 percent of total applications. However, the letter includes an appendix that shows in the District of Columbia that share rises to 11. …

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