I am a mortgage broker and because I applied and was approved by HUD to offer FHA loans I am considered an FHA approved “LENDER”. This title causes confusion to many when you reference FHA “LENDERS”. Many of the “Lenders” you referenced are in fact 3rd party loan originators that failed to meet the standards established by HUD to maintain their License and were therefore fined or had their ability to offer FHA insured mortgages terminated. HUD has an excellent system of checks and balances in place to avoid the very same outcome of the unregulated mortgage industry.

The “Banks” (I prefer not to name names, but your readers know) that wholesale the loans are the ones that are raising the eligibility standards. Although “Banks” have the ability to manually underwrite FHA mortgage loans applications very few are opting to do so due to the risk of having underwritten an uninsurable FHA loan. The majority of all FHA loan applications are underwritten in strict accordance to FannieMae Desk top Originator automated findings. This software renders a decision based on the homeowners credit worthiness, income, assets, and home value. This automated underwriting decision is Black and White, there is no room for variance. All the Bank/Lender has to do is verify all of the required documentation per the automated approval.

This being the fact, I ask you where is the additional risk that justifies the tighter standards that Banks are imposing on homeowners? These are not Sub prime borrowers that need stated loans; these are income qualifying full documentation borrowers with equity and reserves that qualify for a mortgage in accordance with FHA underwriting guidelines that desperately need relief from their high interest rate adjustable rate mortgages now!

So why have the Banks chosen to disqualify eligible homeowners based on a Fico Score? And if a homeowner does meet the Banks minimum required Fico Score, why do they impose additional risk based pricing for the very same homeowner effectively pushing the interest rate higher? Millions of eligible homeowners are not being afforded the opportunity to succeed in a low fixed rate FHA mortgage.

FHA isn’t a 1st class ticket on an airline for the rich; it was intended as a vehicle for the working class!