FHA Increasing Upfront Mortgage Insurance Premium

 

This just in....

FHA is going to increase the upfront mortgage insurance premiums on all purchase, streamline and full credit qualifying refinances to 2.25% that is up from 1.5 and 1.75% currently.

For those of you who don't know what upfront mortgage insurance is, it is a premium paid to HUD to insure a portion of your loan against the borrowers defaulting.  For example the FHA insurance may guarantee the first 30% of the loan value against any loss including interest.

So when you buy or refinance your home using an FHA loan you now pay and will continue to pay a big chunk of that loan upfront to FHA to go into this insurance pool.

It must be that all of the foreclosures have finally drained the tank putting FHA into the RED therefore causing them to up the upfront premiums to help beef back up the reserves to protect against further losses.

My clients already were feeling the pain from the increase from 1.5% of the loan amount to 1.75% which took place about 18 months ago.  Now FHA is taken it to them once again.  It has always been and will continue to be my opinion that it should be a sliding scale based on the borrowers past credit history.  This premium should not be a one size fits all approach with the borrowers with a 800 fico being charged the same amount as the borrowers with a 620 fico.  Everything does not always have to be equal in life, if you take good care of your creditors and pay your debts on time always you should be rewarded, I have always felt.

Apparently the folks in Washington DC don't feel the same as they are sticking to their equality for all home owners with this latest increase.

I think that part of it is rubbish. 

I have posted the text from the official mortgagee letter from today January 21, 2010 below.

Thanks,

Stetson Lowe - Security Home Mortgage - Orem, UT 801-318-4996

 

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

WASHINGTON, DC 20410-8000

ASSISTANT SECRETARY FOR HOUSING-FEDERAL

HOUSING COMMISSIONER

January 21, 2010

MORTGAGEE LETTER 2010-02

TO: ALL APPROVED MORTGAGEES

SUBJECT: Increase in Upfront Premiums for FHA Mortgage Insurance

Effective for FHA loans for which the case number is assigned on or after April 5,2010,

FHA will collect an upfront mortgage insurance premium of 2.25 percent. This policy change will

increase premiums for purchase money and refinance transactions, including FHA-to-FHA credit-qualifying

and non-credit qualifying streamlined refinance transactions.

Programs Covered by Insurance Premiums Shown Below

The upfront and annual premiums and the requirements described in this Mortgagee Letter

apply to all mortgages insured under FHA's Single Family Insurance Programs except those listed

below:

- Title I

- Home Equity Conversion Mortgages (HECMs)

- 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)

Upfront Premiums

FHA will charge an upfront premium in an amount equal to the following percentages of the

mortgage:

• Purchase Money Mortgages and Full-Credit Qualifying Refinances = 2.25 percent

• Streamline Refinances (all types) = 2.25 percent

• HOPE for Homeowners (Delinquent Mortgagors) = 2.00 percent

• Home Equity Conversion Mortgages = 2.00 percent

www.hud.gov espanol.hud.gov

Annual Premiums

Annual premiums will not change at this time.

For FHA traditional purchase and refinance products, the annual premium, shown in basis

points below, is to be remitted on a monthly basis, and will be charged based on the initial loan-to value

ratio and length of the mortgage according to the following schedule:

• HOPE for Homeowners (delinquent mortgagors)

In accordance with guidance issued in Mortgagee Letter 2009-43, HOPE for Homeowners

borrowers will pay 75

basis points (.75 percent of the base loan amount), regardless of the loan to-

value ratio, which is collected monthly.

• Home Equity Conversion Mortgages (HECMs)

The annual premium for all HECM borrowers is

50 basis points (.50 of the outstanding

mortgage balance) and is collected monthly.

First-Time Homebuver with HUD-Approved Pre-Purchase Counseling

The National Housing Act, as amended by the Housing and Economic Recovery Act in

2008, authorizes upfront premiums of up to 3.00 and authorizes premiums of up to 2.75 percent for

first-time homebuyers who complete HUD-approved pre-purchase counseling. Since the upfront

premium rate of 2.25 percent remains below the statutory cap, no variable rate for counseled firsttime

homebuyers is provided for under this Mortgagee Letter.

If you should have any questions concerning this Mortgagee Letter, call 1-800-CALLFHA.

Persons with hearing or speech impairments may access this number via TDD/TTY by calling 1-

877-TDD-2HUD (1-877-833-2483).

Sincerely,

David H. Stevens

Assistant Secretary for Housing-

Federal Housing Commissioner