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New Loan Standards Will Help Increase Access to Safe and Affordable Mortgage Credit

Tuesday, March 15, 2016
Michael Calhoun

Today, the Federal Housing Administration (FHA) issued new rules to update the certification process for loans backed by the agency. All lenders making FHA-backed loans must certify that each loan has complied with the appropriate rules that serve to protect both consumers and taxpayers. Lenders who violate the rules could face the liability of having to forfeit FHA insurance and buy back any loans they sold under false representations and pay triple damages. Lenders must also get certified to be eligible to offer FHA backed loans. Rules finalized today are for the individual loan certification process. The certification process for lenders is, at this stage, only a proposal.

Mike Calhoun, Center for Responsible Lending President, offered this statement on the individual loan certification rules:

These common-sense rules should be welcomed by prospective homebuyers, lenders and taxpayers. The rules provide increased clarity for lenders on the proper standards for making loans to qualified buyers. Previously, lenders feared that they would be liable for any minor errors that had little or nothing to do with the risk of the loan and this was discouraging lending. The rules announced today provide lenders more direction and greater confidence when making these loans. FHA will need to continue to provide guidance as the new rules are applied so that its goals will be fully achieved.

For qualified homebuyers, the bottom line is that more safe and affordable loans will be made.

The mortgage market has not yet fully recovered from the 2008 crisis. Access to mortgage credit is still too limited for qualified homebuyers. It remains a serious problem for families seeking homeownership and for the larger economy. FHA has taken an important step in continuing the housing recovery and opening up opportunity for all prospective qualified homeowners.

For more information, or to arrange an interview with a CRL expert, please contact Charlene Crowell at charlene.crowell@responsiblelending.org or 919.313.8523.