Concern Over Tighter FHA Lending Requirements

There is a growing concern among financial service executives that the Federal Housing Administration is turning the screws too tightly through its new credit requirements. Bernie Glierberman, once one of Detroit's largest builders who has taken to remodeling abandoned houses to remain in business, said at the NAHB convention that without FHA-insured financing, there may be no buyers for the houses he is reclaiming in distressed neighborhoods. And if there are no buyers, Mr. Glieberman, a member of the NAHB's Finance Committee, warned, it could lead to even further abandonment. Former FHA Commissioner Brian Montgomery said he had similar concerns that the agency he headed during President Bush's second term "may not be able to help those who need a life-line." While cautioning that he does not want to knock the efforts of his successor, David Stevens, or HUD Sec. Shaun Donovan — "They have to do what OMB says in order to protect the value of the FHA portfolio," he said — Mr. Montgomery told an NAHB subcommittee that he would be lowering FICO score requirements and insurance premiums rather than raising them. "In the middle of a housing crisis," he told National Mortgage News, "a rescue agency should be expanding capacity, especially for high-risk borrowers who need to refinance or lose their homes." Between Oct. 1 and Dec. 31, according to the agency, just 23% of all FHA loans have gone to minorities. "I've never seen it that low," Mr. Montgomery remarked. By contrast, between Oct. 2007 and January 2008, 29% of FHA originations were to minorities. A year later, that figure had fallen to 26%.