Yesterday at The Mortgage Porter, I wrote about changes that HUD had confirmed via a press release for FHA insured loans. Seasoned mortgage professionals know that the HUD lady hasn’t sang until a Mortgagee Letter is issued and this morning, HUD did just that with ML 2010-02.
Effective on FHA insured loans with case numbers assigned April 5, 2010 or later, the upfront mortgage insurance premium will increase. Typically the FHA upfront mortgage insurance premium is financed, however it can be paid as a closing cost (which is how the 2010 GFE discloses the premium).
FHA insured mortgages for purchases and non-streamline refinances will increase from 1.75% of the base loan amount to 2.25% and streamlined FHA refinances (refinancing an FHA underlying mortgage) will increase from 1.5% to 2.25%.
According this Mortgagee Letter, HUD states that the “annual premiums will not change at this time“. The annual premiums are what consumers pay in the monthly mortgage payment…and I do believe we will see risk based pricing utilizing credit scores impact FHA’s monthly (annual) mortgage insurance premiums in just a matter of time.
According to HUD’s Press Release yesterday, the following changes should take place with FHA insured loans in early summer:
- Seller contributions towards allowable closing costs reduced from 6% to 3%.
- Increasing the down payment requirements for lower credit scores (risk based underwriting). The Press Release states that those with a 580 score would need a minimum of 10% down payment. Lenders all ready have underwriting “overlays” which will not permit this scenario so this “toughening” of the guidelines is a bit lost…unless things are loosey goosey again this summer (I’ll eat two shoes).
HUD’s press release also stated they will “implement a series of significant measures aimed at increasing lender enforcement”.
The upfront mortgage insurance premium increase will go into effect just 25 days before a home buyer needs to be “in contract” to qualify for the home buyer tax credit.