Is Countrywide More Prudent Than FHA?

An article in The Wall Street Journal thinks so.  Although I wouldn’t go quite that far it isn’t too far from the truth.  Potomac Partners sent out an informative message about the current “potential” plight the FHA has, along with some predictions that make sense. First, with $30 billion in current cash reserves to pay claims, the FHA could pay claims for 50 months without considering any premium income from existing or new originations given their current rate. As for the future, Potomac Partners expects that the FHA will not only tighten their underwriting standards, especially in poorly performing products, but also develop their own automated underwriting system. Watch for increased post-endorsement reviews, greater counter-party responsibilities and indemnifications, and increased vigilance on wholesalers. Seller-servicers will be held accountable for the production of the originator, and “the FHA proposal, in effect, would be substituting the Direct Endorsement lender for the GSE seller-servicer.  We would expect the DE lender would have to underwrite and close the loan in its name.”

I would imagine this WILL happen. My personal opinion is that you should be required to have a 640 or 660 middle credit score, max debt to income ratio of 45%, 2 months of reserves, etc.  If you cannot save money then you shouldn’t be buying a home because there are extra costs that come with it.  You are responsible if something breaks, if your taxes and insurance go up, etc.