Over the past several years FHA has seen a continued increase in certain higher-risk credit characteristics in mortgages it insures, including an increase in cash out refinances and mortgages with high debt-to-income (DTI) ratios, a decrease in average borrower credit scores and an increasing concentration of credit scores less than 640 combined with DTI ratios greater than 50 percent.
To address mortgages with higher-risk characteristics particularly when multiple risk factors are present, FHA has updated the TOTAL Mortgage Scorecard to manage the decrease in average borrower credit scores and the excessive risk layering that results when multiple risk factors are present.
Effective for all case numbers assigned on and after March 18, 2019, when a Lender submits a mortgage loan to the TOTAL Mortgage Scorecard via an automated underwriting system (AUS) the Lender may receive feedback results indicating the loan file must be manually underwritten. In these cases, the Lender must document the final underwriting review decision in accordance with existing FHA requirements for manually underwritten mortgages.
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