Tighter FHA Debt-to-Income Ratios Possible

Thursday, July 07, 2011 11:43:00 AM

WASHINGTON - The Federal Housing Administration (FHA) may tighten borrowers' required debt-to-income ratios, a move that could keep many consumers out of the mortgage market according to an American Banker article.

Although the agency has yet to issue definitive ratios, lenders fear such tightening could hurt the still-recovering housing market and cause a further decline in home prices. But a hard cap on debt-to-income ratios likely would lower delinquency rates and bolster the financial health of the FHA's Mutual Mortgage Insurance fund, according to the agency.

The FHA is assessing the variables that go into its Total Scorecard automated underwriting system. Robert Ryan, FHA's acting commissioner, suggested the debt-to-income ratios could be tightened, and instead of automated approval, lenders would conduct manual reviews to ensure borrowers had adequate income or savings.

Comments

Comments are closed on this post.