The ""Federal Housing Administration"":http://www.fha.gov (FHA) is wasting no time putting at least one of the Obama administration's housing finance reforms into place. The agency announced this week that it is implementing a new premium structure for FHA-insured mortgage loans.
[IMAGE] FHA is increasing its annual mortgage insurance premium (MIP) by a quarter of a percentage point on all 30- and 15-year loans. The upfront MIP will remain unchanged at 1.0 percent.
""The new structure"":http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/11-10ml.pdf applies to all new loans insured by FHA on or after April 18, 2011. Existing and reverse mortgage (HECM) loans insured by FHA are not impacted by the pricing change.
FHA Commissioner David Stevens says the annual payment adjustment will increase borrowers' costs about $30 per month and will help to strengthen the agency's depleted coffers.[COLUMN_BREAK]
""After careful consideration and analysis, we determined it was necessary to increase the annual mortgage insurance premium at this time in order to bolster the FHA's capital reserves and help private capital return to the housing market,"" Stevens said in a statement.
He continued, ""This quarter point increase in the annual MIP is a responsible step towards meeting the congressionally mandated two percent reserve threshold, while allowing FHA to remain the most cost effective mortgage insurance option for borrowers with lower incomes and lower down payments.""
The 25 basis point rise was proposed last week as part of the ""Obama administrationÃ¢â‚¬â„¢s report to Congress"":http://dsnews.comarticles/obama-administration-lays-out-plan-for-winding-down-fannie-and-freddie-2011-02-11 on reforming the nationÃ¢â‚¬â„¢s housing finance system, and was detailed in ""President ObamaÃ¢â‚¬â„¢s fiscal year 2012 budget"":http://dsnews.comarticles/budget-proposal-for-2012-aims-to-reduce-deficit-by-more-than-1t-2011-02-14 released Monday.
According to FHA, this premium change enables the agency to increase revenues at a time when it is critical to safeguard the stability of its Mutual Mortgage Insurance fund, which had capital reserves of approximately $3.6 billion at the end of FY 2010. The new pay structure is estimated to contribute nearly $3 billion annually to the fund.
The administrationÃ¢â‚¬â„¢s housing finance plan also recommended that Congress allow the present increase in FHA conforming loan limits to expire as scheduled on October 1, 2011. President ObamaÃ¢â‚¬â„¢s budget proposal projects FHA will insure $218 billion in mortgage borrowing in 2012.