Expected Changes To The FHA Upfront Premium and Monthly Mortgage Insurance Premium .

By
Real Estate Mortgage Broker with George Souto NMLS #65149 FHA, CHFA, VA Mortgages Connecticut NMLS #65149

Assistant Secretary for Housing/Federal Housing Commissioner, David H. Stevens released today a Special Edition Newsletter announcing the expected changes to the FHA Upfront Premium and Monthly Mortgage Insurance Premium (MIP).  In the Newsletter he states:

"As I have previously stated in my testimony before Congress, FHA will lower its upfront premium simultaneously with the increase to the annual premium¹. 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 years². A Mortgagee Letter will be forthcoming once President Obamasigns 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 operational and system changes required to implement FHA's new mortgage insurance premium structure on all new case numbers by September 7, 2010."

So come September 7th. this will go into effect and is bound to have a major negative impact on Borrowers ability to qualify for a mortgage, because the FHA Monthly Mortgage Insurance Premium will cause the Debt-To Income Ratios to increase, and therefore, reduce the Loan Amounts that Borrowers will be able to qualify for.  Presently the MIP is a .55 multiplier, so going to a multiplier of 85 - 90 is a 55% to 64% increase, this is HUGE.  As appose to reducing the Upfront Premium from 2.25% (2.25 points) to 1.000% (1 point)  The Upfront Premium is a one time fee versus the Monthly Mortgage Insurance Premium which is charged every month.  And when you further take into consideration that the Upfront Premiumcan be rolled into the Loan and amortized over 30 years, this reduction is meaningless in my opinion.

FHA is considering one other change that could have a major impact on Borrowers.  FHA is playing with the idea of reducing the Seller Paid Concessions from 6% to 3%.  They have not passed this yet and hopefully they never will.  Stay tuned for more changes to come.

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Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308, gsouto@mccuemortgage.com, or visit my McCue Mortgage Homepage.

 

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Topic:
Mortgage / Finance
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1st Time Buyers
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What is New in Loan Products
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Comments 16 New Comment

Ambassador
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George Souto
Your Connecticut Mortgage Expert
George Souto NMLS #65149 FHA, CHFA, VA Mortgages Connecticut

Nick, not much of what they have been doing has been in the Borrowers interest, and this change is going to have a negative impact real quick.

Joan, this one is hard to swallow.  One of these days they are going to realize that even if they increase the costs, it the number of loans go down, so will their income.

Jennifer, you are right, this is not good, and it will take good Buyers out of the market.

Bill, no they have been talking about decreasing the Seller Paids down to 3% but a decision to do that has not been made yet and it is not part of the Bill that was just passed.

August 06, 2010 04:05 PM
Rainmaker
325,145
Esko Kiuru

George,

Nobody likes this, especially the monthly MIP is going to hurt. But it's either tightening things up a bit and replenishing FHA's reserves that have sunk rather low, or soon FHA would have to ask the taxpayer for alms.

August 06, 2010 07:08 PM
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Judi K Barrett
Broker/Owner, Integrity Real Estate Services -IDAB
Judi Barrett~Integrity Real Estate Services~Idabel, Oklahoma

The logic of these guys is never logical!  Boy, is that a misnomer! 

It's like they speak out of both sides of their mouth with different objectives. 

One thing I'm sure of, whatever reason they give will not be the true reason for doing it.  Usually they say it's for the good of the public, but I think it's for the good of fha.

August 06, 2010 07:31 PM
Ambassador
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Ray Saenz
Homes for Sale in Aurora, Colorado - Aurora, CO
United Property Brokers, Inc

George,
I though that I experienced that before, but it seems that is taking effect on September of this year, thanks for sharing this great information! :) BTW sometimes if they don't want or they are not in the capacity to offer more for down payment they can get this MI hit!

 

August 08, 2010 06:55 AM
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George Souto
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George Souto NMLS #65149 FHA, CHFA, VA Mortgages Connecticut

Esko you make a good point, But if they take a closer look at management and Underwriting Guidelines, they may find other ways to make up that money without putting it on the back of the Borrower.

Judi, they created the mess, they have done very little to correct the mess, and their answer always seem to come down to get more money.  What they need to do is create guidelines that make sense, and manage the money they have better.

Ray, they changed the Upfront Premium from 1.75 to 2.25 earlier and the year.  And last year the also played around with the MIP.  This is not the answer, but they will not do what they need to do, which is to take a closer look at themselves.

August 08, 2010 09:16 PM
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George Souto

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