580 Minimum FICO: FHA Reform, So What?

The House Financial Services Committe, chaired by Barney Frank (D, MA) approved the FHA Housing Stabilization and Homeownership Retention Act of 2008. A full House vote on the bill is expected next week. Much has been covered about the contents of the bill. In an attempt to help "at risk" homeowners, it roughly extends the authority of FHA insurable loans to about double what it is today.


The real question is, so what? Regardless of the Democrat's plans for government mortgage rescue, the secondary market is having none of it, and the very borrowers who are intended to be helped, are being eschewed by investors wary of poor quality(wasn't FHA the OLD subprime?)as subprime focused originators nationwide rapidly transform themselves into newfangled FHA shops.


Since April 1, finding any end investor to purchase FHA insured loans with FICOs under 580 is a fool's errand, regardless of the current or potentially expanded FHA underwriting guidelines (which allow, under certain circumstances, approvals for sub 580 FICOs).

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