WASHINGTON – March 26, 2019 – The Federal Housing Administration (FHA) informed lenders that it will start flagging more high-risk loans. Those mortgages, many of which are extended to borrowers with low credit scores and high loan payments relative to incomes, will undergo a more rigorous manual underwriting process.
The FHA worries that lenders are making loans to borrowers who cannot repay them – and that will result in a jump in defaults that strain the agency’s reserves.
The decision to tighten underwriting standards could mean that fewer first-time home buyers are able to secure mortgages.
Source: Source: Wall Street Journal (03/26/19) P. A2; Eisen, Ben