The Federal Housing Administration (FHA), which is trying to bolster its depleted cash reserves, unveiled tighter underwriting guidelines Wednesday morning.

The guidelines include a hefty down payment for low FICO score borrowers and an increase in the upfront mortgage insurance premium to 225 basis points.

The 10% down payment is required for borrowers with FICOs of less than 580. The MIP will be increased in a few months from the current charge of 1.75 basis points. FHA will allow borrowers to continue financing the upfront MIP.

The agency also will pursue legislative authority to allow flexibility to bring the annual premium — current capped at 55 basis points — higher.

Also, seller concessions will be reduced to 3% from 6%. Scott Stern, who runs the Lenders One cooperative said, "On the whole, mortgage lenders will find the new rules painful but necessary. The problem is that for the past four years, FHA was an 'anything goes' environment."

He added that, "What makes this hard is with FHA hovering around 40% of new loan originations, even small rule changes echo through the housing market with a big impact."

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