Jason Bernabei, TriCastle Realty
Yes, the FHA is once again raising mortgage insurance premiums on its newly-insured borrowers in California and throughout the entire country. It's the FHA's fourth such increase in the last two years, making qualification parameters more difficult for those seeking to refinance or ascertain a purchase loan.
Beginning April 1st upfront mortgage insurance premiums will be higher by 75 basis points, or 0.75%; and annual mortgage insurance premiums will be higher by 10 basis points per year, or 0.10%. For borrowers with a loan size of say $200,000, the new MIP(Mortgage Insurance Premium) will add $1,500 in one-time loan costs, plus an on-going, annual $200 increase in total mortgage insurance premiums paid. Further, for loans over $625,500, beginning June 1, 2012, there will be an additional 25 basis point increase to annual MIP. ALL new FHA loans are subject to these increases -- purchases and refinances.
The FHA detailed the reasons for the increase, the primary explanation being that the Agency is insuring a much larger percentage of the U.S. mortgage market than ever before. In 2006, the FHA insured 2 percent of all purchase-money mortgages. In 2011, that figure ballooned to 18 percent. Unfortunately, as the FHA has insured more loans, its number of loans in default have increased as well, thusly forcing the FHA to boost its reserves with the April increase. Hopefully FHA was mindful of the impending masses of strategic defaulters, as well as the more traditional no-choice defaults looming with all the Stated Income - Stated Assets (SISA) "liar loans" of yesteryear coming to term over the course of the next few years. If not, another hike, or two, or three may be on the horizon.
If there is a silver lining, it is not for new borrowers, but for borrowers currently making MI payments with their mortgage payments. Mortgage insurance premiums will not rise for loans already made, so those folks can rest easy. Also, whether you are left, right, or center, take solace in noting that here is a government program and agency that is at least mindful of actually paying the cost of something, rather than adding further to the Federal debt. And as a result, FHA will be able to draw from those funds to go on continuing to insure borrowers who are not able to maintain a 20% equity position.
Until next time, feel free to give me a holler at jasonb@tricastle.com, and check me out each and every Monday on www.therealtyinsiders.com for more, and be sure to tune in to see myself, and local industry experts talking real estate on “The Realty Insiders,” THE ONLY real estate show in town!
Jay’s Outlook: partly sunny
Jason Bernabei, TriCastle Realty
