FHA increases buyers’ fees

WASHINGTON – Feb. 28, 2012 – Acting Federal Housing Administration (FHA) Commissioner Carol Galante announced a new premium structure for FHA-insured single-family mortgage loans: FHA will increase its annual mortgage insurance premium (MIP) by 0.10 percent for loans under $625,500 and by 0.35 percent for loans above that amount. Upfront premiums (UFMIP) will increase by 0.75 percent.

The premium changes will impact new loans insured by FHA beginning in April 2012. Details will soon be published in a Mortgagee Letter to FHA-approved lenders.

“After careful analysis of the market and the health of the Mutual Mortgage Insurance Fund (MMI) fund, we have determined that it is appropriate to increase mortgage insurance premiums in order to help protect our capital reserves and to continue encouraging the return of private capital to the housing market,” says Galante. “These modest increases are one of several measures we are taking towards meeting the Congressionally mandated two percent reserve threshold while allowing FHA to remain a valuable option for low- to moderate-income borrowers.”

The Temporary Payroll Tax Cut Continuation Act of 2011 requires FHA to increase the annual MIP it collects by 0.10 percent for case numbers assigned on or after April 1, 2012. FHA is also exercising its statutory authority to add an additional 0.25 percent to mortgages exceeding $625,500 assigned on or after June 1, 2012.

The UFMIP will increase from 1 percent to 1.75 percent of the base loan amount, which FHA says will apply regardless of the amortization term or LTV ratio. FHA will still allow buyers to finance this charge through the mortgage. It’s effective for case numbers assigned on or after April 1, 2012.

FHA estimates that the increase to the upfront premium will cost the average borrower about $5 more per month.

Borrowers already in an FHA-insured mortgage, Home Equity Conversion Mortgage (HECM), and special loan programs outlined in FHA’s forthcoming Mortgagee Letter will not be impacted by the pricing changes announced today.

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