What are motgage lending overlays with respect to FHA ?

[veracious]

I recently read an article about the lenders introducing overlayas.

There is talk of legality and lawsuits concerning  FHA minimum score standards and the higher scores being

required by lenders.  Can any mortgage professionals explain their perspective?   Some people, ( journalists)

regard this practice as discriminatory and a form of redling.  What view does the average mortgage pro  feel about it?

I know you have to have good scores in order  to get good rates on conventional loans but I thought  the minimum FHA standard

was going to get the same rate as someone with a higher score?

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ETA:  links    1      http://www.mortgage-underwriters.org/mortgage-underwriting-news/2011/02/25/are-credit-overlays-dispa...

                        2        http://frostmortgage.com/2011/01/20/fha-credit-overlays-may-be-a-form-of-redlining/

                          3        http://activerain.com/blogsview/1549135/lender-overlays-and-you-why-they-will-delay-your-closing

Thanks

[Anonymous]

There is noting illegal about a bank adding requirements.  If they add in straight up discriminatory practices that is one thing, but general guidelines no.  The bank is fronting the money and also typically has to find an investor to buy the loan.  That measn they take the risk initially.  Yeas FHA does insure the loan, but the bank is still putting out it's own money.  If an investor only wants to buy loans that are 600 FICO and above, at 41% DTI or below, etc that is totslly legal and is how it should be.  It is one thing for the government to say we will offer to guarantee loans that hit certian criteria...  That does not mean that they can force banks to use the same guidelines.

[veracious]

Thank you,  mickie08  for a quick reply.

I haven't started the mortgage shopping adventure yet but I just wanted to understand the lenders viewpoint.

I guesss a lot of people become overconfident with their newly aquired "high" Fico scores and get a little cocky.

Personally, I don't intend to approach a lender in that manner, but neither do i wish  to  "beg"  for a loan

Okay,   it is the lenders money I'm borrowing,  but  placing unreasonable restrictions won't be tolerated

.

I'm sure you understand what I mean.