The Tax Relief and Health Care Act of 2006 established a temporary tax deduction for Private Mortgage Insurance (PMI) beginning with loans that were closed after 1/1/2007.
This allowed homeowner’s who were paying private mortgage insurance on loans closed during this time frame to deduct the full cost of their PMI as long as their adjusted gross income didn’t exceed $100,000 for a married couple filing jointly. This was originally allowed for all mortgages closing after 1/1/2007 up to 12/31/2010. Because the housing market has been slow to recover, they extended this through 12/31/2011. Therefore, any associated PMI premiums on homes purchased or refinanced between 1/1/2007 – 12/31/2011 will qualify for tax deductions, subject to income restrictions.
For homes purchased after 12/31/2011 PMI premiums will no longer be tax deductible.
Alternatives to PMI are starting to come back into the market. In the past month new 2nd mortgage programs have come into the market allowing the option of combining a 1st and 2nd mortgage in lieu of paying private mortgage insurance for those borrower’s with at least a 10% down payment. This option provides a nice alternative for those borrowers who are well qualified and have at least a 700 credit score.
Combining a 1st and 2nd mortgage will typically result in a lower monthly payment and a better tax deduction.
Consult with your LoanCentral loan officer to find out more about each of these options, and which is best suited for your personal situation.
Many homeowners strive to pay their mortgage off as quickly as possible. Many strive to own their home free and clear. Most people do this because it’s what their parents always told them they should do. However, for most people, this isn’t the smartest financial move.
Before you pay off or pay down your mortgage, there are several questions you should review first, including:
1. Are you maximizing your contributions to your 401k each year? 2. Do you have all credit cards, car loans and personal debt paid off? 3. Do you have 12 months of liquid assets in case of emergency? 4. Do you have college fully funded for your children?
1. Are you maximizing your contributions to your 401k each year?
2. Do you have all credit cards, car loans and personal debt paid off?
3. Do you have 12 months of liquid assets in case of emergency?
4. Do you have college fully funded for your children?
These are just a few of the areas you should consider before you start paying down or paying off your mortgage.
It is much wiser to satisfy the above objectives first, before you consider paying off your mortgage. Even if all of the above are satisfied, many still choose not to pay off their mortgage.
Your home is an asset that typically appreciates over time. It will appreciate at the same rate whether you owe
a mortgage against it or not. You have the choice to either use your money to pay off your mortgage, or you can instead accumulate that money into an investment, which allows your wealth to grow both through your home appreciation, and the growth of your investment account, increasing your overall wealth.
Furthermore, having your home fully paid for is little consolation if you lose your job. Without a job, it’s difficult to tap into that equity to help you get by while you aren’t receiving a pay check.
At LoanCentral, we help you look at your overall financial goals and choose a mortgage which will help you achieve those goals!
Congress recently voted to extend an existing payroll tax cut into the first two months of 2012, before they were set to expire on December 31, 2011. The tax cut temporarily reduces the social security tax rate from 6.2% down to 4.2%. This cut saves approximately 160 million workers on average $83 per month in their paychecks or... $20 per week.
However, as with any tax cut there has to be an offsetting increase in revenue to make up for it… especially when the tax cut depletes our already crippled social security fund.
The payroll tax extension is said to cost approximately $33 billion over 10 years and will be paid for by increasing the fees charged to mortgage lenders by Government Sponsored Entities Fannie Mae, Freddie
Mac & FHA. The effect of this will be higher interest rates for the very same low and middle income families that are said to be helped by the tax cut.
The increase in fees is set to hit the markets within the next 30 - 45 days, and will result in an increase to mortgage rates of approximately .1%. For the homeowner with a $300,000 loan, this works out to an additional cost of approximately $6,200 over the life of a 30 year loan.
Using social security as a funding source for borrowing money for government stimulus is not a very responsible practice. It can be likened to encouraging people to pull money from their 401k accounts to go spend today.
Allowing the government the ability to increase mortgage rates as a means of covering their spending is also reckless…particularly in an economy with a crippled housing market.
Lenders will be adding this fee into their rate sheets within the next 30 days. Now is the time to lock into an interest rate to take advantage of today’s lower rates!
It was recently brought to my attention that many potential homeowners believe they need a 20% down payment in order to buy a house. This couldn’t be farther from the truth! This week, we focus on low down payment programs. These programs are abundantly available…share the word!!!
Zero Down Loan Programs: the USDA Rural Housing Program allows zero down options for those purchasing in what USDA defines as rural areas. In King County this includes areas east of the City such as Duvall, Carnation, Fall City, Snoqualmie, North Bend, Monroe, Enumclaw, etc. There are income restrictions on this program, however it allows for income up to approximately $90k for a married couple. For those who have VA benefits, VA still offers zero down financing Both of these programs are excellent opportunities to get into a home with no down payment!
Conventional 3% Down Programs: conventional financing is now available with a 3% down payment for those with at least a 700 credit score. Mortgage insurance rates have recently been lowered for these programs making them a very attractive option. In addition, there is another 3% down conventional program with some expanded guidelines such as allowing for a 680 credit score, entire down payment from gift funds and some added benefits for teachers, law enforcement workers, fire fighters, healthcare workers and military personnel.
FHA 3.5% Down Programs: these programs enjoy a bit more forgiving underwriting guidelines than conventional low down payment programs, including credit scores down to 620, entire down payment can come from gift funds, and loan amounts up to $567,500.
Call today for more information on these programs!
Higher FHA Loan
Limits Reinstated!
In 2008 the conforming loan limits had been increased to $ 567,500 in the King, Pierce, and Snohomish regions in reaction to the financial crisis which caused jumbo financing options to virtually disappear.
These temporary loan limits were only in place until September 2011, at which time they were reduced back down to $ 506,000. However, FHA has officially reinstated their higher limits of $567,500 for King, Pierce and Snohomish County, effective immediately and they will remain in place through December 31, 2012.
This means that someone can purchase a home priced up to $ 583,000 with a 3.5% down payment!
With FHA 30 year fixed rates currently in the range of 3.75%, this program provides an amazing opportunity!!!
Conventional financing loan limits remain at $506,000.
The ongoing woes in the financial markets in Europe have continued to lend in keeping mortgage rates low throughout the past week. We are still sitting at record low levels, and this seems to be spurring activity with home purchases.
Nationwide, purchase activity has increased over the past week as consumers are realizing the benefits of the low interest rates coupled with low home prices. In most markets in the United States it is now cheaper to buy than it is to rent!
Interest rate thought for the day: it’s better to be locked and wish you were floating, than to be floating and wish you were locked!
The November jobs report was released today and showed 120,000 new jobs were created. The private sector added 140,000 new jobs, offsetting the government losses, which was right on with expectations.
Unemployment took an unexpected loss from 9% to 8.6%, which has many analysts scratching their heads. One number within the jobs report that isn’t getting very much attention is the ‘Labor Force Participation Rate’. This is a ratio that includes people qualified for work, above the age of 16 and not in the military, against the total number of people living in the U.S. This measures the total number of people living in the United States and participating in the U.S. work force. The participation rate fell from 64.2 to 64.0, which currently represents a 30 year low.
What’s important about this number is that it needs to be above 66 or it will be difficult for our economy to grow fast enough to lower our budget deficit.
The bottom line is that the jobs report shows the labor market continues to improve at a gradual pace. It is important to note that while we don’t see mortgage rates moving much higher in the near term, we also have a difficult time seeing rates moving much lower. Inflation, while not yet a problem, is still elevated. It if continues to creep higher, this will limit any improvement home loan rates may see.
Interest rate thought for the day: it’s better to be locked and wish you were floating, than to befloating and wish you were locked!
HOUSING REVIVAL MAY HINGE ON WIDER REFINANCING ACCESS
Fed policy makers are meeting this week to discuss alternatives to help spur the housing market in an effort to help revive the U.S. economy.
Last week it was announced that a new HARP program would soon be released to give homeowners who are underwater on their mortgages the ability to refinance. This would reduce monthly payments, free up cash for other purchases that could spur the economy and reduce unemployment, Fed Governor Daniel Tarullo said. The original HARP program which began in 2009 fell 80% short of its goal of helping 5 million households.
The agencies are hoping this new HARP program will bring better success in helping more families.
There is also talk of the Fed buying mortgage backed securities which would help to push down borrowing costs also driving more refinancing options for homeowners.
"The Achilles' heel of the Fed's efforts so far has been that the monetary-policy transmission has not worked as they would like because of, in large part, the inability of consumers to get loans" for homes and other purchases, said Ward McCarthy, chief financial economist at Jefferies & Co. in New York. Bank lending standards are currently so tight many well qualified homeowners are turned away from mortgages. With Fannie Mae and Freddie Mac making Banks buy back record numbers of loans, the Banks are now underwriting loans in fear, rather than based on common sense. Whether the agencies are aware of this problem or not remains to be seen.
At this point, it looks like the Fed is pushing to roll out the next HARP program, and then start buying mortgage-backed securities in an effort to lower interest rates and see if this will spark the housing market. We will continue to monitor these actions and will push out information as soon as it becomes available.
OBAMA SIGNS BILL TO INCREASE FHA & VA LOAN LIMITS
President Obama has signed HR 2112, the Consolidated and Further Continuing Appropriations Act of 2012 into law renewing the expired higher loan limits for Federal Housing Administration (FHA) and U.S. Department of Veterans Affairs (VA) loans for an additional two years, through Dec. 31, 2013.
The higher loan limits expired on Oct. 1, 2011, when the size of a mortgage that the FHA could buy or guarantee was reduced to $506,000 from $567,500 for most counties in Washington State.
"Restoring the higher FHA loan limits will help to stabilize home values, provide constancy while private investors re-enter the market, and enable millions of creditworthy consumers to get home loans with the best mortgage rates and the lowest fees and down payment requirements" said National Association of Home Builders (NAHB) Chairman Bob Nielsen.
National Professional Mortgage Magazine
HOW YOUR CREDIT SCORE IS DETERMINED
There are five factors that comprise your credit score. They are listed below in order of importance:
Payment History: 35% impact.
Paying debt on time & in full has a positive impact. Late payments, judgments & charge-offs have a negative impact. Missing a high payment has a more severe impact than missing a low
payment. Delinquencies that have occurred in the last two years carry more weight than older items.
Outstanding Credit Balances: 30% impact.
This factor marks the ratio between the outstanding balance & available credit. Ideally, the consumer should make an effort to keep balances as close to zero as possible & definitely below 30% of the available credit limit when trying to purchase a home.
Credit History: 15% impact.
This marks the length of time since a particular credit line was established. A seasoned borrower is stronger in this area.
Type of Credit: 10% impact.
A mix of auto loans, credit cards, and mortgages is more positive than a concentration of debt from credit cards only or finance company accounts.
Inquiries: 10% impact.
This quantifies the number of inquiries that have been made on a consumer's credit history within a 6-month period. Each inquiry can cost from 2 to 50 points on a credit score, but the maximum
number of inquiries that will reduce the score is 10. In other words, 11 or more inquiries in a six-month period will have no further impact on the borrower's credit score
Mortgage rates are directly tied to your credit score. It is important to contact your LoanCentral mortgage professional as soon as you are thinking of purchasing a new home to make sure your credit scores are the best they can be. We can help advise you on steps you can take to improve your scores to help get you the lowest possible interest rate.
If you understand how money works you may reconsider whether or not a15 year fixed is right for you. Consider this… a 4% 30 year fixed is actually costing you only 3% net after taxes. Inflation has averaged 3.2% for the last 30 years. It’s 3.9% this year.
Think of it this way: Would you ever prepay on a 0% car loan? No! Nor should you pre-pay your mortgage at these historically low rates. Google with all its cash gets this. They recently borrowed more money in a bond offering to investors with these low rates, rather than spend their cash.
Instead of pre-paying your mortgage, pre-pay your 401k. That is whereyou need to be putting your discretionary money. Unbelievably, the stats sayonly 6% of the population are maxing out their 401k contributions.
Before you consider taking out a shorter term mortgage, make sure youare accomplishing these important financial goals.
Only after you have accomplished these prudent financial steps shouldyou consider pre-paying your mortgage.
These historically low rates are the silver lining of these uncertaintimes. Take full advantage of this opportunity!!!
For all loans closing on or after 10/1/11, the new loan limits for ‘conforming jumbo’ loans will be $506,000. True conforming loan limits remain at $417,000. Loan amounts between $417,001 - $506,000 represent ‘conforming jumbo’ programs.
These loans have slightly higher interest rates than loan amounts up to $417k, but enjoy the same program guidelines. This provides an advantage over the jumbo programs which carry higher interest rates and much more stringent underwriting guidelines.
Speaking of jumbo programs…we are seeing many more jumbo programs emerging into the market, and guidelines loosening up a bit as well.
Down payment requirements, credit score requirements, and debt-to-income ratios have all loosened in the past couple of months. We also now have options for those buyers who have a lot of liquid assets, but not enough income to qualify for their jumbo loan.
Jumbo interest rates have improved dramatically in the past several months as well. As you can see, we have 5 year ARM loans at 3.62% for loan amounts up to $1,500,000!!!
At LoanCentral, we offer a wide variety of programs to meet the needs of our diverse client base. Act now, these rates won’t be around forever!
The loan limits for ‘conforming jumbo’ loans and FHA ‘jumbo’ loans are set to change in October. In 2008, temporary high balance loan limits were set in place through an act of Congress in response to the financial crisis that took away jumbo financing virtually overnight. These temporary loan limits, which currently allow for financing up to $567,500, are set to expire on 10/1/11.
The impact of this will mean that all loan amounts over $417,000 will need to be financed under true jumbo loan programs that carry higher interest rates and more stringent underwriting and down payment guidelines.
This means that people need to plan ahead!!
Loans that are currently in process with loan amounts between $417,000 - $567,500 must close before 9/30/11 (time frames may vary by lender). This impacts both conventional and FHA loans.
If you aren’t able to close before 9/30/11, you will want to make sure to consult your loan officer as to how these changes will impact your qualifications and buying power.
Currently, the conforming jumbo program allows for a 10% down payment and FHA jumbo allows for a 3.5% down payment on loan amounts between $417,000 - $567,500. After October 1st, the jumbo loan programs will require a 20% down payment, and FHA loans will only be allowable up to a loan amount of $417,000.
If you act quickly, there is still time to get a loan with these great programs!!!
The week started with the Producer Price Index and Retail Sales reports coming out better than expected, sending rates dramatically higher due to the positive economic news. Wednesday, the Consumer Price Index also came in better than expected which should have pushed rates upward further.
However, concerns over the inflation reports coming out of China coupled with more troubling news regarding the debt crisis in Greece caused rates to improve instead.
Today reports on housing starts and building permits were released and came out better than anticipated. Housing starts rose 3.5%, well above expectations. Building Permits, a sign of future construction, jumped nearly 9% to 612,000 well above the 548,000 that was expected, and the highest level so far this year.
The housing sector as a whole still continues to drag on the economy, but a glimmer of hope was reported today!
Dropping interest rates add to housing affordability, which is already at a record level. In many areas it is now cheaper to buy a home than to rent.
These lower rates also create an opportunity for those who missed out on the last refinance opportunity when rates increased to over 5% in April.
Mortgage rates have been improving slowly but consistently over the past several weeks. Today’s rates (May 6th) mark the lowest we have seen since mid-January 2011. Many experts are warning, however, that these rates may not stay for long.
The Jobs report was released today showing 244,000 new jobs created last month, far above expectations. However, the Unemployment Rate increased to 9%, up from 8.8%. This shows that the jobs being created simply aren’t enough to have made a significant dent in the number of jobless Americans.
Today’s jobless report was mixed (increase in the number of new jobs coupled with an increase in the unemployment rate). However, the overall positive tone does validate that the labor market is gradually improving. And as the labor market improves so will the economy and housing…and with that interest rates will gradually rise as well.
We are constantly reminding everyone of what a great market this is and urging people to not miss this opportunity. At some point in our lives, I believe we will all look back and recall this as the best opportunity to buy real estate in our lifetimes. At that moment you will either be able to recall what a great move you made, or how badly you missed out! Which will you do?
Your home is an asset that typically appreciates over time. It will appreciate at the same rate whether you owe a mortgage against it or not. You have the choice to either use your money to pay off your mortgage, or you can instead accumulate that money into an investment, which allows your wealth to grow both through your home appreciation, and the growth of your investment account, increasing your overall wealth.
Since the housing crisis began over 3 years ago, the mortgage industry has been inundated with regulatory reform. New regulations now control processes surrounding appraisals, limits on the amount the APR can increase and decrease, Good Faith Estimates and HUD procedures, and Loan Officer Licensing.
In what many hoped was a cruel joke, a new set of regs was scheduled to take effect today, April Fool’s Day.
Several law suits against the FED have been filed in an effort to stop this new round of regulations that are vague & being argued as going beyond the scope of what the government should be able to regulate in America. Late last night, a temporary stay was issued delaying the new regs until more can be established in a hearing scheduled for Tuesday.
The proposed new regulations are designed to standardize compensation practices within the industry, and prevent unfair and deceptive ‘steering’ of a client into products where the Loan Officer receives greater compensation. Unfortunately, these changes do the consumer absolutely no good whatsoever, and in fact result in higher costs, higher inefficiency, and higher rates.
Under this new regulation, Loan Officers by law will no longer be able to pay for any fees on behalf of the consumer. Pricing will be required to be standardized for all loans. While the net impact on mid
The new regulations have driven many small mortgage brokers out of business, and has resulted in a concentration of lending through the large depository Banks, and mid
Mortgage Brokers are credited with originally bringing competition into the market place, as they forced the Banks to be more competitive in order to maintain market share. With the reduced number of brokers driving competition amongst the Banks, recent rate surveys have uncovered the fact that the Banks (including Mortgage Banks) are charging much higher rates than those that are currently available through a Broker.
On average, a Broker may be able to save a consumer between 1% - 3% in fees on a typical loan ($3500 - $10,500 on a $350,000 loan). LoanCentral is your local mortgage broker…helping save you & your clients thousands of dollars on your mortgage!
Thank you all for sharing my waitress analogy on Loan Officer Compensation! It’s exciting to see it making the rounds on the internet. Please do me a favor if you would, I wrote this parable as part of my March Presidents Letter to the members of the Washington Association of Mortgage Professionals to get people involved. (www.MyWamp.com)
I would appreciate a follow-up email to family, friends and co-workers in the mortgage industry to encourage them to get involved in their local and state associations. We need to increase the “Numbers”, of our members. Our associations also need their “Minimal Dues” to support our industry in this fight against this ridiculous rule.
Why?
· Brokers did NOT design the mortgage products which contributed to the current housing market. · Banks marketed these Mortgage products thru brokers on behalf of Wall Street · Banks accepted these products and underwrote them · Borrowers accepted these loans with multiple disclosures · Banks funded these loans and ran their QC audits · Banks (at times) sold them to the secondary market · Investors eagerly invested in these loan product pools · Yet Banks are exempt from many important parts of this LO Comp rule designed to help protect the consumer. · Lastly – LO Compensation has no place in REG Z or any other government regulation.
· Brokers did NOT design the mortgage products which contributed to the current housing market.
· Banks marketed these Mortgage products thru brokers on behalf of Wall Street
· Banks accepted these products and underwrote them
· Borrowers accepted these loans with multiple disclosures
· Banks funded these loans and ran their QC audits
· Banks (at times) sold them to the secondary market
· Investors eagerly invested in these loan product pools
· Yet Banks are exempt from many important parts of this LO Comp rule designed to help protect the consumer.
· Lastly – LO Compensation has no place in REG Z or any other government regulation.
Fed’s attacking INCOME as a solution – really?
The stated goal of the Fed is to increase transparency to the consumer and save them money.
The Feds in their recent “clarification” webinar, stated that the consumer is confused – but fails to see the reason for the confusion is the ever increasing number of ineffective disclosures that the regulatory agencies require!
In the same webinar – the Fed stated that the reason Broker LO’s or Managers cannot be paid on profitability – is that PROFIT can only come from higher rates to the consumer. Really? So to increase my profitability, all I need to do is charge 9% when everyone else is charging 4%... Good luck originating ANY loans. (Using 9% because that is the rate the Fed used in the Webinar)
The Fed fails to realize that expense control, efficiency, systems, technology and good people can all affect our profitability. Delivering quality loan files that are complete and meet their lock dates, and don’t require multiple touches by their staff makes us all more efficient and reduces our costs.
The FEDs assumption on Profitability states that
· two different companies, · doing the exact same number of loans, · at the exact same interest rate and fees · – will have the same exact profitability.
· two different companies,
· doing the exact same number of loans,
· at the exact same interest rate and fees
· – will have the same exact profitability.
Sorry, in the real world it doesn’t work that way. A reduction in costs will also translate into increased profitability.
Loan Officer Compensation ANALYSIS – YOU Take the test
LO Comp and the consumers choice
In my humble opinion, LO Compensation has little to do with a consumer choosing the best loan options for themselves.
Let’s look at two examples to make my point. By the way – this is a recent real pricing example comparing one of the top 5 BANKS rates and fees, to our broker pricing for the same rate.
OPTION 1
BANKER
BROKER
Rate - 30 year fixed
4.75%
TOTAL fees to consumer
$14,000
$ 3,000
LO Compensation
$ 2,000
Which would you choose?
ý
þ My choice
OPTION 2 – Let’s increase the LO’s Income
$ 15,000
þ STILL My choice
Hmmm… I think the consumer cares MORE ABOUT what their total costs are than what the LO is paid.
Let’s see what happens if a company chooses to LOSE money to close a transaction in an effort to save a relationship with a client.
(I’ll really exaggerate this one…)
OPTION 3 – Let’s increase the LO’s Income Even More!
$ 10
$ 50,000
Rate and program being equal – it’s about the total cost to the consumer. As with any product or service, many other factors come into play such as convenience, EXPERIENCE and recommendations from friends and family that TRUST a loan originator who has provided sound advice and quality service in the past.
I’m not saying their weren’t “Bad Brokers”, as we know – every industry has its’ own bad apples. The SAFE act has jettisoned many of them from our business, one of the only good pieces of legislation passed in the last 3 years that HASN’T increased costs to the consumer. The Fed attempt to regulate compensation is not the answer. (What’s next – Neurologists and Dermatologists must both be paid the same hourly rate? Attorneys with 30 years of experience must be paid the same salary as recent college grads?)
This is America – or so I thought. Attempting to regulate the compensation plans of mortgage brokers will only increase the costs to the consumers overall.
Regulators are proposing a change in how food servers in the United States are paid due to recent e coli poisoning at a local restaurant. E Coli (short for "Escherichia coli" ), can cause serious food poisoning in humans and the bacteria is responsible for occasional product recalls due to unsanitary conditions at Major Slaughterhouse 's around the country.
Clearly the fault of the food server known as the "Waiter" or "Waitress".
Clearly there are NOT enuf REGULATIONS
Mr. Tommy Aikey awoke a few days ago with food poisoning after having a Steak meal served by Wendy Knowfalt, a food server at "Steak and Ail".
After Tommy Aikey reported the incident to local authorities, the legislators and regulators quickly got to work on a new bill that will prevent this type of food poisoning in the future. From the experts within the government, all indications show that clearly the waitress was at fault for the ordeal.
Here is a breakdown of the new regulation and the three main components.
1. Waiters and waitresses will no longer be able to have their tips or other compensation based on the type of the meal they serve or based on the servers experience level, or service levels to the customer. For example:
2. Compensation to the waiter/waitress must be either paid by TIPS from the consumer, or by credit card - NOT by BOTH.
3. Anti-Steering Provision and Safe Harbor
i. Note that it is unclear within the proposed law how far this legal definition goes, and the Feds are offering NO CLARIFICATION. If the same steak dinner is available 2 blocks away, is it in the best interest to send the client to the competing restaurant? ii. Is serving Steak over Salmon in the best interest of the consumer's health. All questions that have severe penalties and will only be clarified during future inspections of the restaurant by the Food Inspector.
i. Note that it is unclear within the proposed law how far this legal definition goes, and the Feds are offering NO CLARIFICATION. If the same steak dinner is available 2 blocks away, is it in the best interest to send the client to the competing restaurant?
ii. Is serving Steak over Salmon in the best interest of the consumer's health. All questions that have severe penalties and will only be clarified during future inspections of the restaurant by the Food Inspector.
Lastly, in another unrelated law that is being considered called QRM, or Qualified Reluctantly Meals- certain Restaurant owners should be aware that they may have to eat 5% of the consumers meal prior to serving.
Welcome to my world of analogies. Yes the story is bogus to illustrate how crazy and confusing the recent announcement of the Fed rule regulating and changing compensation to loan officers set to become effective on April 1st. We all want to protect the consumer and have a more transparent lending process but I believe focusing on Loan Officer Compensation is not the answer. This is America
On February 14th 2011, FHA Sent out a Mortgagee Letter # 11-10 regarding the Annual Mortgage Insurance Premium changes and guidance on how to prepare for the upcoming changes.
The purpose of the update from FHA was to introduce a ¼% increase in the ANNUAL Mortgage Insurance Premium.
(This does not affect Reverse Mortgages)
The Effective Date of the increase is for any new Case #’s (new FHA Loans) assigned on or after April 18th, 2011
There are also new procedures for “requesting” case numbers by lenders and brokers such as LoanCentral on that same April 18th date.
If there are loans in process – there is an “Automatic” case number cancellation which will also be effective for all FHA loans not insured prior to April 18th.
Why is it getting more expensive?
The National Housing Act for ensuring that FHA’s Mutual Mortgage Insurance Fund stays “financially sound” was a concern throughout the housing crisis which started a few years ago. The legislators mandated in section 202 of this act, that it is imperative that this fund is strengthened to ensure that FHA will continue in its role of providing a home financing source to Americans even during periods of economic volatility, and to continue serving it’s mission of helping underserved borrowers.
How will this affect your payment on FHA Loans?
Below you will see that the ¼% increase to the Annual Mortgage insurance premium will increase the payment in this example by $33 per month. There are no changes to the UPFRONT mortgage insurance on FHA Loans at this time.
As you can see - It is anticipated that this increase will have minimal impact on borrowers but will significantly strengthen the capital position of the FHA insurance fund.
Here’s how we got there…
NOTE that while this increase affects most single family residences purchased or refinanced through FHA, there are some exceptions – please see your LoanCentral loan officer for a list of those exceptions. More at www.LoanCentral.com
The bottom line is that NOW is the time to buy before your payment increases if you want to lock in the current lower FHA insurance premiums. It’s already MARCH!
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