WASHINGTON — The Federal Housing Administration has released the first chapter of a new handbook designed to provide lenders with clearer guidance on the agency's underwriting requirements.
FHA Commissioner Carol Galante initiated the revision of its handbook so that lenders would have more detail and certainty in originating agency-backed loans.
Julian Castro, the secretary of the Department of Housing and Urban Development, has also endorsed the effort to restore lender confidence.
"In the wake of the crisis, we've seen a lot of frustration from lenders when it comes to their FHA business," Castro said. "Many have been reluctant to lend because they fear unanticipated consequences."
The initial response to the 334-page first chapter, which covers originations and the FHA endorsement process, appears to be positive.
"There are a few areas that still need further clarity," said Bud Carter, a mortgage consultant with Potomac Partners in Washington. But overall, "they have done a good job," he said.
In response to comments on the first draft, FHA rolled back some of the proposed changes that might have restricted credit.
The final draft restores FHA's current guidance, which allows a friend to gift a downpayment provided that friend documents their interest in the borrower. Initially, FHA wanted to limit downpayment assistance to relatives.
FHA is still working on the servicing and appraisal parts of its handbook. There will also be chapters on specialized programs, like 203(k), which combines a purchase and renovation loan.
Separately, an audit by HUD's Office of Inspector General found that FHA has not increased its annual lender renewal fees since 1993. FHA lenders currently pay a $1,000 recertification fee. The design of this flat dollar fee is "not responsive to inflation, the size of the lender or the risks associated with particular lenders," the OIG report says, and doesn't "recoup the expense of lender monitoring."
In response, HUD said it has started a review of FHA renewal fee and plans to implement changes in two years.