FHA Insurance Rates to Change Soon
The Federal Housing Administration (FHA) has previously indicated it was going to change its insurance premium rates in September 2010. Now, due to concerns raised by the industry about readiness, the planned adjustments have been pushed up by a month.
HUD Deputy Assistant Secretary Vicki Bott, stated that the FHA will make the premium fee changes on all new case numbers effective October 4, 2010.
Bott said. “Since these system changes impact regulatory disclosures, lenders expressed they must have the additional time to implement and test systems. FHA took this feedback seriously and has accommodated the need for additional time.”
On August 5th FHA received congressional approval to raise borrowers’ annual premiums for single-family mortgage insurance. Federal mortgage insurers now have enough leeway to jack up annual fees it charges borrowers three-fold, or 1.55%. Bott insists, however, that the annual premium is not going to go that high. She expects the annual mortgage insurance premium to increase from 0.55% to 0.85% - 0.90% of the loan amount.
FHA, however, will also lower the upfront premium charged on the amount borrowed by 100 basis points from the current 2.25%.
The new premium structure is meant to ensure FHA a means of increasing its capital reserve funds. These funds have deteriorated to its lowest level in the agency’s 75-year history at the end of fiscal year 2009, as a result of rising mortgage defaults.