August 20, 2015
The FHA has announced a new initiative designed to help the agency review lending practices of participating lenders and expand credit to potential FHA borrowers.
According to HUDNo.15-107,”The Federal Housing Administration today announced a new method for evaluating the lending practices of FHA-approved lenders and understanding the sorts of borrowers they are serving.”
That new standard, known as the FHA Supplemental Performance Metric, is designed to enhance the FHA’s existing “compare ratio” and according to the press release, “offer more nuanced insight into a lenders specific performance while encouraging lenders to serve eligible underserved borrowers.”
This, the press release says, will assist participating FHA lenders in reviewing the effects of their FHA lending, “at all ends of the credit spectrum in line with FHAs willingness to insure loans to eligible borrowers” who happen to have lower credit scores.
This is one more tool to help FHA, lenders, and the public, know exactly who were serving, said Ed Golding, Principal Deputy Assistant Secretary for Housing. By better understanding FHAs acceptable risk tolerance levels for a variety of credit scores, lenders will have the confidence to lend more broadly and FHA will have more data on how successful those lenders are.
FHA officials believe this new Supplemental Performance Metric can help address lender concerns, “about the Compare Ratio being a comparison to ones peers rather than to FHAs risk tolerance.” The release says that examining FHA loan defaults “in three distinct credit bands,” has definite benefits, which include a more “nuanced look at lender performance”.
Do you work in residential real estate? You should know about the free tool offered by FHA.com. It’s designed especially for real estate websites–a widget that displays FHA loan limits for the counties serviced by those websites.
It is easy to spend a few seconds customizing the state, counties, and widget size for the tool; you can copy the code and paste it into your website with ease. Get yours today: http://www.fha.com/fha_loan_limits_widget
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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