On January 26th the Federal Housing Administration (FHA) will reduce annual mortgage insurance premiums from 1.35% to 0.85%. That's 0.50% WOW!!
The President and his administration are taking a major new step to make mortgages more affordable and accessible for families that are creditworthy. This action will translate into a $900 reduction in the annual mortgage payment for the typical first time homebuyer.
Those that already own a home will see similar reductions to their mortgage payments if they refinance. This action is expected to help millions of families save a ton of money in mortgage payments in the coming years, supporting the housing market recovery.
Even though some believe 0.85% is still too high, any reduction in the mortgage insurance premium is welcomed. Marc Savitt, president of the National Association of Independent Housing Professionals and The Mortgage Center says "HUD also needs to allow borrowers to drop the monthly insurance premium once the loan reaches 80% LTV. Lowering the costs associated with FHA financing, will allow more borrowers to qualify and afford the program.”
The White House did note that the new premium level is consistent with the FHA's goal to continue to strengthen its financial health through growing reserves. This action however, still has to be approved by Congress.
According to an independent annual audit of the U.S. government’s mortgage insurance fund that was released in November, the FHA's capital-reserve ratio, which is supposed to stay above 2%, reached 0.41% in 2014. This agency is obligated to hold enough cash to cover any projected losses in its portfolio which totals $1.1 trillion. The report estimated that the FHA's Mutual Mortgage Insurance (MMI) Fund will not reach the congressionally mandated 2% mark again until 2016.
According to the audit the FHA posted its first positive balance since 2011. Also the MMI Fund created for single-family programs gained close to $6 billion and it is projected to be close to $4.8 billion for the 2014 fiscal year. Compared to the negative $1.1 billion that was reported for the last fiscal year this is a huge improvement.
When the audit was released, David Stevens, president and CEO of the Mortgage Bankers Association, stated that, "Maintaining this trend will require FHA to continue its ongoing work to improve transparency and certainty around its loan quality assessment methodology, as well as to re-examine mortgage insurance premiums, both the amount and the structure.
Stevens added that premiums are currently at an all-time high, and that the FHA needs to find the right balance so it can “meet its mission and further grow its reserves by sustainably increasing volumes without being adversely selected should only the highest risk borrowers be willing to pay the high premiums.”
The Obama Administration plans to take additional steps in the next few months "to cut red tape and clarify lending standards to build on the measures announced today, and the administration will continue to urge bipartisan progress in Congress to pass comprehensive housing finance reform legislation that will secure a stable and resilient housing finance system."
This is such great news for aspiring homeowners everywhere!
Author:Amy Sims Phone: 504-460-1016 Dated: January 15th 2015 Views: 810 About Amy: ...
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