FHA intends on lowering upfront mortgage insurance premiums, but raising the monthly mortgage insurance premium. This will make an impact for those who are looking to purchase a home but are down payment sensitive.
This announcement below came from the desk of David H. Stevens, Assistant Secretary for Housing/Federal Housing Commissioner earlier today. It was sent to mortgage lenders around the US. It highlights the efforts going on in congress to stabilize the FHA Mutual Mortgage Insurance Fund.
Over the past week, Congress has taken action and passed H.R. 5981. The bill gives FHA the authority to adjust its annual mortgage insurance premium yielding approximately $300 million per month to the FHA Mutual Mortgage Insurance Fund at a time when its reserves are perilously low.
As I have previously stated in my testimony before Congress, FHA will lower its upfront premium simultaneously with the increase of the annual premium. It is our intention that effective on September 7, 2010, FHA’s upfront mortgage insurance premium will be adjusted down to 100 basis points on all amortization terms and the annual mortgage insurance premium will increase to 85-90 basis points on amortization terms greater than 15 years. A Mortgagee Letter will be forthcoming once President Obama signs the bill into law, but with today’s passage of H.R. 5981 and our expedited implementation schedule, I wanted to immediately inform the industry of our plans so the lending community can begin preparing for the operation and system changes required to implement FHA’s new mortgage insurance premium structure on all new case numbers by September 7th, 2010.
While we appreciate and applaud this recent action, there is still work to be done. HUD remains steadfast in its commitment to comprehensive FHA reform legislation, similar to the FHA Reform Act passed earlier this year by the House, which would further enhance FHA’s lender enforcement capabilities and risk management efforts. We hope Congress will take swift action to pass a broader FHA reform bill when they return from the August recess. FHA’s risk management efforts will not be complete without the ability to monitor lender performance and ensure compliance with our rules.
Although the transition timeframe is short, the implementation by September is critical. Thank you in advance for the efforts of you and your organization to make this change happen on such short notice. We appreciate your hard work and continued partnership.
**The upfront and annual premium changes do not apply to the following FHA programs: Title I, HECM, HOPE for Homeowners (H4H), Section 247 (Hawaiian Homelands), Section 248 (Indian Reservations), Section 223(e) (declining neighborhoods), Section 238(c) (Military Impact areas in Georgia and New York). LTV’s <= 95% will increase to 85bps and LTV > 95% will increase to 90 bps
What does this mean for you? Portions of your up-front Mortgage Insurance Premium (MIP) is moving from being included on top of your purchase price to a higher amount financed into your loan, into your monthly premium amounts paid through the period of time you carry MI. For minimum down financing this will result in slightly higher monthly payments. This, combined with the potential for reduced seller paid closing costs from a maximum of 6% down to 3% will mean higher entry cost and higher monthly payments for minimum down buyers. Stay tuned to www.KnowYourHomeLoan.com for more information as it becomes available.
BUT, the good news is that we have solutions and will analyze each borrowers situation to find the best program to meet their needs! We have a new zero down conventional program AND a variety of first time home buyer programs like Minnesota Housing, Dakota County Bond, City Living and many other statewide, county or city specific, programs!
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