By Jack Guttentag
In 2008, FHA attempted to increase mortgage insurance premiums on low credit scores, and to reject scores less than 500 unless the loan-to-value ratio was 90 percent or less. The proposal was shot down by Congress. Premiums are scheduled to rise this year, but will not be scaled by credit score.
The method FHA currently uses to control its losses, which is to blackball lenders whose loan submissions have high default rates, is clumsy and only partly effective. Lenders removed from the program are replaced by others, and lenders who spread their subprime loans among larger numbers of good loans are never caught.
When you need a mortgage, select the lender; don’t allow the lender to select you.
Jack Guttentag is professor emeritus of finance at the Wharton School of the University of Pennsylvania.
©2013 Jack Guttentag
Distributed by MCT Information Services
Copyright© 2015 RISMedia, The Leader in Real Estate Information Systems and Real Estate News. All Rights Reserved. This material may not be republished without permission from RISMedia.
Content on this website is copyrighted and may not be redistributed without express written permission from RISMedia. Access to RISMedia archives and thousands of articles like this, as well as consumer real estate videos, are available through RISMedia's REsource Licensed Content Solutions. Offering the industry’s most comprehensive and affordable content packages. Click here to learn more! http://resource.rismedia.com