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Housing and Urban Development Secretary Shaun Donovan to tell the House Financial Services Committee to require larger down payments by borrowers, increase the minimum required credit scores, and limit kick backs from sellers, including closing costs and upgrades.

Due to previously relaxed lending standards that fed the now imploded housing bubble, the lending standards must be tightened again to regulate the market. Donovan plans to explain that the current FHA loans require stricter risk controls than were previously in place. The banks that aren’t lending or modifying loans have gotten most of the bailout assistance, all while rising fraud in FHA loans threatened the housing market. The FHA must get things in order and running efficiently and up until now this has been an overlooked challenge facing the new administration.

The tighter standards are in response to the FHA’s dramatic volume increase that has quadrupled since 2006 causing the agency to handle a large number of defaults. Creating worry the agency will be the next for a government bailout. We are unsure what the impact the policy change will have on Stockton foreclosures and Stockton homes for sale.

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