FHA Temporarily Relents on “Credit Disputes” Rule

June 25, 2012

Lend and Borrow buttons on keyboardThe National Association of Home Builders (NAHB) and other housing and banking industry groups have pulled together in an effort to protect borrowers from the Federal Housing Administration‘s (FHA) “credit disputes” rule set to go into effect on July 1.

The “Credit Disputes” rule would have prohibited borrowers with any credit disputes of more than $1,000 from obtaining FHA financing. Under the rule, borrowers would have to either pay off ongoing credit disputes of more than $1,000 that appeared on their credit reports or show proof that they have entered into a repayment plan with their creditors before they could qualify for an FHA loan.

The NAHB is strongly opposed to this rule as they believe it would clamp down on the already slow flow of mortgage credit as well as provide a roadblock preventing qualifying creditworthy borrowers from getting a FHA-insured loan.

The FHA temporarily relented on the issue, releasing an updated mortgage letter on June 15. In the letter, the FHA states that they are rescinding the earlier ruling on the “credit disputes” rule. The FHA will be releasing new guidance on this controversial topic in the near future.

“FHA killing off the rule is not a surprise when you take into account the resounding objection from the housing finance community and their concern that this would overly constrain credit,” Edward Mills, senior vice president at FBR Capital Markets said. “This action shows how it can be incredibly difficult to make choices that move towards protecting the insurance fund over keeping mortgage credit available.”

Categories: Mortgages, NAHB

About The Author

Read All Stories By Mitch Levinson

Mitch Levinson is the author of “Internet Marketing: The Key to Increased New Home Sales” published by BuilderBooks. He is an Internet marketing expert with expertise in search engine optimization, website development, email marketing, social media and CRM consulting services. He is known for creating effective programs that can be tracked through analytics to prove effectiveness and ROI. Mitch is founder and president of MLC New Home Marketing and MLC FlatFee Realty, as well as managing partner of mRELEVANCE, LLC, a Marketing, Communication, Interactive agency with offices in Chicago and Atlanta. He currently leads the Chicago team. A Multi-Million Dollar Sales Producer who earned an MBA in Computer Information Systems and eCommerce, he brings a unique perspective and experience to the field of real estate communications. Mitch combines the two interests in order to help home builders and developers gain a competitive advantage through the Internet and technology. When he isn’t behind a computer, he enjoys participating in sports and coaching his kids’ teams. Mitch resides in Arlington Heights, Ill., a northwest suburb of Chicago, with his family, which includes two rambunctious labs. Visit my Google+ profile.

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