On Monday, the Federal Housing Association announced a new method of evaluating lending practices for mortgages approved by the organization. They say that these changes will boost lending.
A news release on Monday indicated that its Supplemental Performance Metric will compliment the existing compare ratio. The compare ratio is used to compare performance with the FHA’s mortgage peers. It compares a lender’s rate of early defaults and claims for insured single-family mortgages to other approved lenders in a geographic area. Recently, lenders have been considered about these methods.
If a lender is found to have a poor compare ratio, meaning they do not measure up to their peers, they can lose their approval from the FHA. However, the new method of comparing will do things differently, and hopefully help lenders and borrowers.
According to Mortgage Daily, “the new metric is intended to determine how lending at all ends of the credit spectrum compares to FHA risk tolerance. It will provide more nuanced insight into performance of specific lenders while encouraging lending to eligible underserved borrowers.”
“By measuring default rates and claims in three distinct credit bands, the metric compliments the Compare Ratio, providing a more granular, nuanced look at lender performance, with the added benefit of better understanding of who lenders are serving,” the notice stated.
Department of Urban and Housing Development Principal Deputy Assistant Secretary for Housing Ed Golding has high hopes for the changes. He predicted in the announcement that mortgagees will have more confidence to expand FHA lending with the enhanced measurements.
These changes by the FHA could be exactly what you need to bu
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