The Federal Housing Administration is seeking public comment on mortgage underwriting changes it plans to implement soon to reduce defaults and losses to the federal mortgage insurance fund.
FHA wants to cut seller concessions in half to 3%, increase the downpayment requirement to 10% for borrowers with less than 580 credit scores, and tighten its standards for manually underwritten loans.
Borrowers with credit scores below 500 will no longer be eligible for a loan once the changes go into effect.
"These are the latest in a series of changes to allow the FHA to manage its risk better while continuing to support the nation's housing recovery," FHA commissioner David Stevens said.
Department of Housing and Urban Development officials proposed these changes back in March and now they are seeking public comments for 30 days as they prepare for implementation. The comment period ends August 13.
FHA is trying to stem losses on its depleted reserve fund, hoping to keep its capital position in the black.
