FHA’s Proposed Changes effective 2013

By
Real Estate Broker/Owner with Texas Five Star Realty, Plano Texas

 

HUD Announces Two Changes to Mortgage Insurance for 2013

Please note that these changes are proposal to be included sometimes in year 2013 and have not been implemented yet

FHA’s Proposed Changes effective 2013:

HUD has released its annual audit results ( http://goo.gl/TJ9LA)  with two surprises highlighted.

One, in reversing the long-established policy of a “prior Administration” that FHA mortgage insurance (MIP) is cancelled at 78% of the original value, FHA will require that the MIP remain on all FHA loans for as long as the loan is an FHA-insured loan. In other words, the MIP remains until the mortgage is paid off entirely. The reason for the change is straightforward: FHA loans carry the insurance for the life of the loan but the payment for the insurance ends at 78% of the original value, so FHA has faced foreclosures that have no insurance premiums still being paid, harming the insurance fund.

Unfortunately, carrying the MIP for the life of the loan will impair the finances of the borrowers FHA strives to help. I have written to the head of FHA with the suggestion of an alternative to this drastic step: have the loans originated with an end to the FHA insurance (such as today's 78% LTV) that will coincide with the end of the charge for MIP. It doesn’t have to be at 78%; it could be 75% or 70%, as long as the lender agrees to the removal of the insurance at the agreed LTV. This is how private mortgage insurance works and is quite easy to implement.

The second surprise is that HUD expressed the intent to increase the annual MIP another .10% (10 basis points). This comes on the heels of periodic increases since the real estate crisis began. It is designed to increase FHA’s capital levels, which have fallen dangerously low due to foreclosures of loans originated prior to 2010. Loans since that time perform well and are actually adding to FHA’s capital position.

The dates of these changes are loosely described as “2013”, so at this point it’s a good idea to let buyers, as well as family or friends who might look to refinance to a new FHA loan, know that it’s wise to take action soon. With FHA financing, the transaction only needs to be started (having the FHA case number) in order to lock in the existing structure.

 

 FHA’s Changes effective 4/9/2012:
To see the FHA MIP and UFMIP Rate Changes that went in effect on April 4th 2012, please see http://www.texasfivestarrealty.com/FHA_changes_2012-04.asp

To See the effect of these rate changes and calculate rate increase for different scenarios, please see http://www.texasfivestarrealty.com/FHA_MIP_UFMIP_Calculator_2013.asp 

 
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Tags:
fha changes
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Rainer
172,564
John & Irma Nelson
San Antonio Real Estate Broker/Agent with Get It Sold Realty - San Antonio, TX
San Antonio Real Estate Agents - San Antonio Homes
This is definitely going to affect the way people think regarding loan choices. I think more and more people are going to do conventional
Dec 10, 2012 11:12 AM #1
Ambassador
793,048
John Meussner
Mason-McDuffie Mortgage, Conventional Loans, Jumbo Loans, FHA, 203(k), USDA, VA, - Walnut Creek, CA
#MortgageMadeEasy Walnut Creek, CA 484-680-4852

It's a shame that just a few years ago FHA was the go-to option for those home buyers and owners with lower incomes -  it really bothers me that the same government that wants to 'tax the wealthiest Americans' is at the same time taxing the least wealthy through real estate.  FHA is the biggest example of how the government has began using real estate as it's latest cash cow.

Great post Bahman

Dec 10, 2012 11:19 AM #2
Anonymous
Bahman

Yes, both of you are correct. The buyers and their agents need to be aware of this up coming changes.

Dec 13, 2012 08:38 AM #3
Rainer
4,513
Tristan Sherrill
Great Western Home Loans - Frisco, TX

Great article Bahman.

Feb 11, 2013 07:25 AM #4
Rainmaker
315,366
Bahman Davani, CM at Texas Five Star Realty, Plano, TX (214) 457-7055
Texas Five Star Realty, Plano Texas - Frisco, TX
Homes for Sale in Plano, Frisco, Prosper, Allen TX

Thank you, now these proposed changes has modified and become effective April 11st and June 3rd for MIP Rates and duration changes, respectively. Please see the impact analysis of these changes for purchaser assignined FHA case numbers on or after April 1st and June 3rd in the new article at:   my web site:

 
 

Thanks,
Bahman Davani
--
Bahman Davani, CM
Principal Broker, REALTOR
®,
ABR®, GRI, SFR®, TAHS, CDPE, eAgentC
(214) 457-7055 Mobile
Bahman@TexasFiveStarRealty.com
www.TexasFiveStarRealty.com
Texas Five Star Realty
Feb 11, 2013 01:24 PM #5
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Rainmaker
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Bahman Davani, CM at Texas Five Star Realty, Plano, TX (214) 457-7055

Homes for Sale in Plano, Frisco, Prosper, Allen TX
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