A bill introduced in the House of Representatives Thursday aims to limit defaults on mortgages backed by the Federal Housing Administration by further tightening standards on borrowers.
The bill, sponsored and introduced by Rep. Scott Garrett (R.-New Jersey), would raise the minimum down payment on FHA loans to 5 percent of the principal, from its current minimum of 3.5 percent. The bill also would restrict borrowers from using FHA loan money to cover their closing costs.
Both moves are intended to stem defaults and foreclosures on FHA-guaranteed loans, which are guaranteed by federal funds if borrowers can’t pay. Since the beginning of the housing crisis, concern has grown among politicians and market analysts about the FHA’s ability to pay out on massive defaults…..
