April 11th, 2012 8:08 PM by Linda Barratt PA and Justin Cervantes, PA
EFFECTIVE April 9, 2012
Download this link for the complete details: FHA_Updated_MIP Chart 2012.pdf
As anticipated, HUD announced that mortgages backed by the FHA will become more expensive. Once again, future borrowers are paying for the problems of previous borrowers - the money will be used to bolster the sagging reserves in the FHA mortgage insurance premium fund. Hopefully any more claims that FHA is "fine" and doesn't need more capital will stop in the near future - it does need more capital. The increase in insurance premiums would bring in about $1.25 billion during the rest of 2012 and through September 2013 which will be added to about $1 billion FHA is receiving from the servicer settlement. Every little billion helps...
First, remember that the agency does not make loans, or buy loans, but instead insures mortgages that meet its guidelines. Mortgage insurance, similar to a guaranty fee, protects one party from the risks of the borrower becoming delinquent of going into foreclosure.
FHA's guidelines are very lenient, although most lenders have overlays in order to bolster the product, and claim that borrowers with credit scores of 580 or more can put down as little as 3.5 percent. The FHA will increase its annual mortgage insurance premium by 0.10 of a percentage point for loans under $625,500, which would now cost 1.25 percent of the loan amount, up from 1.15 percent, on 4/1. And starting on 6/1 the premium for larger loans would rise more, or by 0.35 of a percentage point, bringing the total premium to 1.5 percent. This annual premium is broken down in monthly payments. The upfront mortgage premium is also increasing by 0.75 of a percentage point, bringing the premium to 1.75 percent of the loan amount, which can be financed/added into the mortgage.
And the fun continues...JJ