Roundup: NAHB Urges FHA to Change Credit Watch

The mortgage affiliates of homebuilders are starting to get clipped under the Federal Housing Administration's Credit Watch program, and their trade group is urging the FHA to change its default standards so they are not penalized for concentrating on home purchase loans.

The FHA should have separate default standards for refinancings and purchase mortgages, because refis have much lower default rates, according to a letter to FHA Commissioner John Weicher from the National Association of Home Builders. "Otherwise, the Department of Housing and Urban Development will be conducting investigations and inquiries that discourage builders and their lending subsidiaries from selling homes and making loans to the very group that President Bush has targeted for increased homeownership," the NAHB says in a March 17 letter.

On April 1, HUD suspended the FHA lending privileges of the Charlotte, N.C., branch office of DHI Mortgage Co., which is an affiliate of the nation's largest homebuilder, D R Horton Inc., Arlington, Texas.

HUD announced the DHI suspension June 4 along with other Credit Watch suspensions. DHI Mortgage is based in Austin, Texas. Under the Credit Watch program, the FHA can suspend a branch office when the default/claim ratio is twice the national average. The Charlotte branch has a default/claim ratio that is more than four times the 2.11% national average. Overall, DHI Mortgage has a 2.04% default/claims ratio.

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