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Complexity is thriving.

Complexity is thriving

Mortgage lenders crave uniformity. But that's less and less in the cards. Even the federal government mortgage insurance programs that used to foster uniformity are now moving in the opposite direction.

Our interview with FHA Commissioner Austin Fitts reveals that FHA is likely to move to some kind of regional underwriting approach in the near future. What this holds for each lending market is a mystery at this point. But Fitts says it means a loosening as well as a tightening where the economy justifies such moves.

This signals a departure for the government lending market, but it's something that has been a feature of the private mortgage insurance market and the giant secondary market agencies for a long time. To have FHA move to different credit standards for different regions marks the arrival of a new consciousness in federal government programs. It is being driven by the harsh economic reality that in America today, there can be a region in deep recession while neighboring regions are thriving.

The new consciousness at FHA also reflects the new thinking in Washington that is born and bred of the subsistence diet that all federal government programs have been put on because of the deep and lingering federal budget deficit. The thinking at HUD is FHA can't continue to take the kind of financial battering it's taking as a result of regional downturns that push tons of foreclosed properties into its inventory without having some kind of mechanism to respond to these downturns. The losses from FHA's property disposition efforts in such hard-hit regions are heavy and Fitts says the insurance funds cannot endure on a self-sustaining basis without changes to the overall "term and conditions" of the basic FHA insurance program. By this she means changes will be proposed to the down payment amounts, loan limits and premium structure for the FHA single-family program.

So, change appears inevitable. Keeping up with the changes that apply to each state market you lend in will be an ever-increasing challenge. Complexity rather than uniformity appears to be the new order of the day.
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Title Annotation:Federal Housing Administration mortgage insurance policy
Author:Hewitt, Janet Reilley
Publication:Mortgage Banking
Article Type:editorial
Date:Apr 1, 1990
Words:351
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