The Federal Housing Administration said on Tuesday that it plans to make it easier for banks to dodge penalties from errors during the mortgage process—in a move to encourage lending to riskier borrowers.
The new provision means lenders will have to worry less about fines for giving FHA-backed mortgages to unqualified lenders.
Banks that have been slapped with big penalties—like JP Morgan and Bank Of America—have backed out of FHA-backed lending.
Lending consultant Jim Parrot told the Wall Street Journal that the FHA is trying to “narrow lender risk” and that with the change more of the FHA’s target borrowers—those less wealthy—will be able to find lenders. [WSJ]
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