Expected Changes To The FHA Upfront Premium and Monthly Mortgage Insurance Premium .

Mortgage and Lending with George Souto NMLS #65149 FHA, CHFA, VA Mortgages NMLS #65149

Assistant Secretary for Housing/Federal Housing Commissioner, David H. Stevens released today a Special Edition Newsletter announcing the expected changes to the FHA Upfront Premium and Monthly Mortgage Insurance Premium (MIP).  In the Newsletter he states:

"As I have previously stated in my testimony before Congress, FHA will lower its upfront premium simultaneously with the increase to the annual premium¹. It is our intention that effective on September 7, 2010, FHA's upfront mortgage insurance premium will be adjusted down to 100 basis points on all amortization terms and the annual mortgage insurance premium will increase to 85-90 basis points on amortization terms greater than 15 years². A Mortgagee Letter will be forthcoming once President Obamasigns the bill into law, but with today's passage of H.R. 5981 and our expedited implementation schedule, I wanted to immediately inform the industry of our plans so the lending community can begin preparing for the operational and system changes required to implement FHA's new mortgage insurance premium structure on all new case numbers by September 7, 2010."

So come September 7th. this will go into effect and is bound to have a major negative impact on Borrowers ability to qualify for a mortgage, because the FHA Monthly Mortgage Insurance Premium will cause the Debt-To Income Ratios to increase, and therefore, reduce the Loan Amounts that Borrowers will be able to qualify for.  Presently the MIP is a .55 multiplier, so going to a multiplier of 85 - 90 is a 55% to 64% increase, this is HUGE.  As appose to reducing the Upfront Premium from 2.25% (2.25 points) to 1.000% (1 point)  The Upfront Premium is a one time fee versus the Monthly Mortgage Insurance Premium which is charged every month.  And when you further take into consideration that the Upfront Premiumcan be rolled into the Loan and amortized over 30 years, this reduction is meaningless in my opinion.

FHA is considering one other change that could have a major impact on Borrowers.  FHA is playing with the idea of reducing the Seller Paid Concessions from 6% to 3%.  They have not passed this yet and hopefully they never will.  Stay tuned for more changes to come.


Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308, gsouto@mccuemortgage.com, or visit my McCue Mortgage Homepage.


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 Info about the author:

George Souto NMLS# 65149 is a Loan Originator who can assist you with all your #FHA, #CHFA, and #Conventional #mortgage needs in Connecticut. George resides in Middlesex County which includes #Middletown, #Old Saybrook, #Middlefield, #Durham, #Cromwell, #Portland, #Higganum, #Haddam, #East Haddam, #Moodus, #Chester, #Deep River, and #Essex. George can be contacted at (860) 573-1308 or souto@snet.net


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Carol West
Carol West Real Estate, LLC - Hillsboro, OR
Real Estate Agent, Hillsboro, Beaverton, Portland

Thanks for the "heads up" for advising our Buyers to get off the fence and into Escrow!

Aug 05, 2010 11:05 AM #1
William J. Archambault, Jr.
The Real Estate Investment Institute - Houston, TX

I'd be all for euthanizing FHA and HUD if they weren't a monopoly just now.


Aug 05, 2010 11:09 AM #2
Al & Peggy Cunningham, Brokers
RE/MAX West Realty Inc., Brokerage - Brampton, ON
Our Family Wants To Help Your Family!

Unbelievable George! Not much notice with September 7th just around the corner! It just doesn't stop does it?

Aug 05, 2010 11:10 AM #3
Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Thanks George.  FHA just kicked a few more home buyers under the bus.

Increasing the up front always made sense to me because it can be financed.  Incresing the monthly will, over the years raise more money for FHA and that's surely their intention.

Aug 05, 2010 11:20 AM #4
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Carol, it isn't much notice, but it is better than waiting until they come out with the Mortgagee Letter.

Bill, I might line up right behind you.  This is all about them and the Borrower is not even being taken into consideration.

Al and Peggy, your right it doesn't stop, and I am sure there will be more to come, as a result of all the foreclosures that they are getting hit with.

Lenn like I stated in the blog the Upfront does not have much of an impact, but the MMI will kick up the Monthly Mortgage Payment significantly, and that will reduce the buying power.  Just what we needed, making selling a house even tougher.


Aug 05, 2010 11:56 AM #5
Adam R. Cohn
We actually get mortgages closed FAST!

They do nothing right to fix things, just make it worse.

Aug 05, 2010 12:03 PM #6
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Adam, well put.  Unfortunately they don't seem to see that.

Aug 05, 2010 01:24 PM #7
Nick T Pappas
Assoc. Broker/Broker ABR, CRS, SFR, e-Pro, @Homes Realty Group, @HomesBirmingham & Providence Property Mgmnt, LLC Hun... - Huntsville, AL
Madison & Huntsville Alabama Real Estate Resource

George, I can't help but think there is a better way out of this.  Increasing the upfront premium over the MIP just seems to make so much more sense...I guess that's why they didn't opt for that.

Aug 05, 2010 03:24 PM #8
Joan Whitebook
BHG The Masiello Group - Nashua, NH
Consumer Focused Real Estate Services

George -- I just had lunch today with a local mortgage broker and she was explaining this over lunch.  I felt sick and had to bring most of my lunch home.  Good grief... from one extreme to another..... this is not making sense.

Aug 05, 2010 04:02 PM #9
Jennifer Fivelsdal
JFIVE Home Realty LLC | 845-758-6842|162 Deer Run Rd Red Hook NY 12571 - Rhinebeck, NY
Mid Hudson Valley real estate connection

George I am sure glad I can count on you as a resource for FHA updates.  This seems messy, more will not qualify for a mortgage and that's not good.

Aug 05, 2010 04:30 PM #10
Bill Gassett
RE/MAX Executive Realty - Hopkinton, MA
Metrowest Massachusetts Real Estate

George - I thought the 6% to 3% was already approved and that they just put off instituting it until the fall?

Aug 06, 2010 12:50 AM #11
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Nick, not much of what they have been doing has been in the Borrowers interest, and this change is going to have a negative impact real quick.

Joan, this one is hard to swallow.  One of these days they are going to realize that even if they increase the costs, it the number of loans go down, so will their income.

Jennifer, you are right, this is not good, and it will take good Buyers out of the market.

Bill, no they have been talking about decreasing the Seller Paids down to 3% but a decision to do that has not been made yet and it is not part of the Bill that was just passed.

Aug 06, 2010 09:05 AM #12
Esko Kiuru
Bethesda, MD


Nobody likes this, especially the monthly MIP is going to hurt. But it's either tightening things up a bit and replenishing FHA's reserves that have sunk rather low, or soon FHA would have to ask the taxpayer for alms.

Aug 06, 2010 12:08 PM #13
1 ~Judi & Don Barrett & Chassy Eastep - Integrity
Integrity Real Estate Services 118 SE AVE N, Idabel, OK 74745 - Idabel, OK
BS Ed, Integrity Real Estate Services -IDABEL OK

The logic of these guys is never logical!  Boy, is that a misnomer! 

It's like they speak out of both sides of their mouth with different objectives. 

One thing I'm sure of, whatever reason they give will not be the true reason for doing it.  Usually they say it's for the good of the public, but I think it's for the good of fha.

Aug 06, 2010 12:31 PM #14
Ray Saenz
Exit Realty Laredo - Laredo, TX
Homes for Sale in Laredo, TX - Texas, Realtor

I though that I experienced that before, but it seems that is taking effect on September of this year, thanks for sharing this great information! :) BTW sometimes if they don't want or they are not in the capacity to offer more for down payment they can get this MI hit!


Aug 07, 2010 11:55 PM #15
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Esko you make a good point, But if they take a closer look at management and Underwriting Guidelines, they may find other ways to make up that money without putting it on the back of the Borrower.

Judi, they created the mess, they have done very little to correct the mess, and their answer always seem to come down to get more money.  What they need to do is create guidelines that make sense, and manage the money they have better.

Ray, they changed the Upfront Premium from 1.75 to 2.25 earlier and the year.  And last year the also played around with the MIP.  This is not the answer, but they will not do what they need to do, which is to take a closer look at themselves.

Aug 08, 2010 02:16 PM #16
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