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David Stevens, The Federal Housing Administration Commissioner, wants the nation's largest loan originators to loosen their underwriting standards, allowing more minorities to qualify for government-backed single-family loans.

The commissioner noted that FHA is taking several steps to reduce default risk. But the agency does not want to raise the FHA 3.5% downpayment requirement to 5%, despite congressional pressure. "If we had increased the downpayment to 5% we would severely impact the ability of a good family" to buy a home, he said.

In 2008 many top ranked lenders voluntarily imposed a minimum 620 credit score as subprime borrowers rushed to refinance into FHA loans. Commissioner Stevens told minority real estate professionals that the lenders' action has improved the performance of FHA loans and reduced defaults.

However, the commissioner now wants lenders to consider borrowers with lower FICO scores. "The one thing I will tell you, the difference in approval rates for African-Americans and Latino borrowers between 580 and 620 is significant," Mr. Stevens said.

The FHA commissioner made his comments at a recent conference on minority home ownership.

Back to business as usual.

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