WASHINGTON, Jan. 20 (UPI) -- The U.S. Federal Housing Administration said Wednesday it would tighten loan requirements to reduce risks and increase its capital reserves.
The FHA, a major insurer for mortgage lending, said it would raise its mortgage insurance premium to 2.25 percent, a change effective this spring, and then seek permission through legislative action to increase the maximum for premiums further.
The changes require a public comment period before taking effect. The FHA proposed requiring borrowers with credit scores below 580 to come up with a 10 percent downpayment. Those with higher credit scores would qualify for a 3.5 percent downpayment, the FHA said.
Further, the proposals requiring a public comment period include reducing seller concessions from 6 percent to 3 percent of the mortgage.
"Striking the right balance between managing the FHA's risk, continuing to provide access to underserved communities and supporting the nation's economic recovery is critically important," FHA Commissioner David Stevens said in a statement.