The Department of Housing and Urban Development (HUD) has issued a final rule that permits mortgage companies to disburse up to 1% of a mortgage amount before using all of the funds provided by the borrower. This rule is meant to simplify the process of combining mortgages into mortgage-backed securities and help ensure interest rates for FHA-insured mortgages remain competitive. Public comments suggested more flexibility in disbursement limits, but HUD maintained the 1% limit to manage risks effectively. This final rule also makes minor organizational changes to existing regulations.
Simple Explanation
HUD, a government agency, made a new rule letting banks give out 1% of a house loan before spending all the money the borrower put in. This change is to make things smoother for putting these loans in bundles, sort of like bagging marbles together, so they can be shared with others, helping to keep costs fair for everyone.