WASHINGTON – As part of ongoing efforts to strengthen the Federal Housing Administration’s (FHA) capital reserves, FHA Commissioner David H. Stevens today announced a new premium structure for FHA-insured mortgage loans increasing its annual mortgage insurance premium (MIP) by a quarter of a percentage point (.25) on all 30- and 15-year loans. The upfront MIP will remain unchanged at 1.0 percent. This premium change was detailed in President Obama’s fiscal year 2012 budget, also released today, and will impact new loans insured by FHA on or after April 18, 2011.
“After careful consideration and analysis, we determined it was necessary to increase the annual mortgage insurance premium at this time in order to bolster the FHA’s capital reserves and help private capital return to the housing market,” said Stevens. “This quarter point increase in the annual MIP is a responsible step towards meeting the Congressionally mandated two percent reserve threshold, while allowing FHA to remain the most cost effective mortgage insurance option for borrowers with lower incomes and lower down payments.”
HOW DOES THIS ENCOURAGE THE RETURN OF PRIVATE CAPITAL TO THE HOUSING MARKET?
"FHA is still the way" in the purchase market. The modest increase in monthly payment will undoubtedly upset some folks, especially Originators and Realtors, but a positive perspective can be taken...
We've been complaining about over-tightened risk management policies and irrational lender overlays for two-years now. It's gotten worse and worse as more "onesy-twosy" reforms have been implemented with no uniformity.
Beefing up FHA's reserve fund might pave the way for a modest relaxation of underwriting regs though. Perhaps instead of saying "relaxation" we should describe the move to bolster the FHA's reserve account as a forward looking indication of common sense FINALLY creeping back into the home loan underwriting process. Seems like a few targeted initiatives are in the works.....
...(read more)
Source: http://www.mortgagenewsdaily.com/02142011_fha_mortgage_insurance.asp
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