FHA Mortgage Insurance Rates are Going Up in April 2012 for Bay Area Borrowers

Posted by Jason Wheeler | Fully Follow Me | Subscribe

The FHA is said to be raising mortgage insurance rates in April 2012 from 1.00% to 1.75% and the monthly premium is going from 1.10% to 1.20%. This means you need to get off the fence and buy that home you’ve been thinking about if you want to take advantage of low mortgage insurance rates from the FHA.

This will also eliminate many from being able to afford the FHA Streamline program that allows borrowers to refinance with no appraisal and limited income documentation.

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Here is the Official Press Release from Hud.gov on raising mortgage insurance.

WASHINGTON – As part of ongoing efforts to encourage the return of private capital in the residential mortgage market and strengthen the Federal Housing Administration’s (FHA) Mutual Mortgage Insurance Fund, Acting FHA Commissioner Carol Galante today 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.  Up front premiums (UFMIP) will also increase by 0.75 percent.

These premium changes will impact new loans insured by FHA beginning in April and June of 2012.  Details will soon be published in a Mortgage Letter to FHA-approved lenders.

“After careful analysis of the market and the health of the 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,” said 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.  This change is effective 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.  This change is effective for case numbers assigned on or after June 1, 2012.

The UFMIP will be increased from 1 percent to 1.75 percent of the base loan amount.  This increase applies regardless of the amortization term or LTV ratio.  FHA will continue to permit financing of this charge into the mortgage.  This change is effective for case numbers assigned on or after April 1, 2012.

FHA estimates that the increase to the up front premium will cost new borrowers an average of approximately $5 more per month.  These marginal increases are affordable for nearly all home buyers who would qualify for a new mortgage loan.  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.

Taken together, these premium changes will enable FHA to increase revenues at a time that is critical to the ongoing stability of its Mutual Mortgage Insurance (MMI) Fund, contributing more than $1 billion to the Fund, based on current volume projections through Fiscal Year 2013.