Wonderful information should you be getting a loan during this time!!
Good Friday! There are some (big) changes to the FHA program beginning on September 7th, 2010.
FHA is lowering their Up Front Mortgage Insurance (Financed on top of the loan) from 2.25% down to 1%. Yes, this sounds great doesn't it? Not so much, they are raising the monthly mortgage insurance from .55% to .90%. It may not sound like much, so let's take a look at the example below:
How does this affect our clients?
$200,000 Purchase price
4.5% Interest Rate
PRE- September 7th
Principal interest and mortgage insurance payment: $1,127.16
AFTER- September 7th
Principal interest and mortgage insurance payment: $1,172.45
As you can see the payments will rise by $45.29 in this example.
If you have a borrower looking for a home now (or on the fence waiting), it's important
to let them know about these changes. This can alter their "approved for" amount by as much as $10,000!
It's important to work with someone who understands how these changes will affect you and your clients.
Please let me know if I can help in any way.
Have a wonderful Weekend!
Below you will find the actual letter sent out from David Stevens.
August 5, 2010 LINKS
Over the past week, Congress has taken quick 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 in value to the FHA
Mutual Mortgage Insurance Fund at a time when its reserves are perilously
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 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 Obama signs the bill into Law schedule, I wanted to immediately
inform the industry of our plans so the lending community can begin preparing
for the operational and system structure on all new case numbers by September 7, 2010.
With this authority, FHA is in a better position to address the increased
demands of the marketplace and return the MMI fund to congressionally
mandated levels without disruption to the housing market. 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 and risk management efforts.
We hope Congress will take swift action to pass 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, 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.
¹The 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).