FHA changes effective October 4, 2010

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Real Estate Technology with Content, coding, marketing, host.

Effective for FHA loans for which the case number is assigned on or after October 4, 2010 the Upfront Mortgage Insurance will decrease from 2.25 to 1.00 (100 basis points) on all FHA insured loans except Home Equity Conversion (HECM - "reverse mortgage"). Chances are you have heard this or some version of it but until yesterday, September 1, 2010, it was not in writing in the official form from HUD.

When are FHA case numbers assigned?

Case numbers must be assigned prior to ordering third party services such as the appraisal. Appraisals are not ordered until there is a fully executed sales agreement in the lender's possession. The lender orders the FHA case number and assigns it to the loan application where it becomes permanent record. 

Monthly Mortgage Insurance also changing.

With UFMIP going down MMIP is heading up. Much more dangerous to the industry because it impacts monthly payment and thus debt-to-income ration (DTI). Currently on loans of over 95% the MIP is .55% annually and from 95% and lower it is .50% annually. Effective October 4, 2010 those numbers will be .85% and .90% which results in an increased monthly payment.

Contrary to some reports there has been no notification of change in the amount of closing contributions by the seller which can be contributed to cover closing costs which is 6% and has not (yet) changed. The buyer must contribute 3.5% of their own money but it can be a gift.

This information applies to 203b and 203k loans.

Examples - top row is now, second row is after 10/4 and the $43.39 is the monthly payment increase:

Sales Price Down Loan Amt UFMIP Total Loan P&I Pmt MIP P&I&MIP
200,000 7,000 193,000 4,342.50 197,342.50 1,054.98 88.46 1,143.44
200,000 7,000 193,000 1,930.00 194,930.00 1,042.08 144.75 1,186.83
              43.39 

Questions? Don't hesitate, ever, to contact me.

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I started writing on Active Rain in 2006 when I was representing the mortgage industry. I am no longer in that industry and many of the older posts contain outdated information. Please do not contact me for LENDING or MORTGAGE questions but rather contact a licensed mortgage professional from your area. I have always been in marketing and branding and that is still what I do. Thanks for reading!

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Re-Blogged 2 times:

Re-Blogged By Re-Blogged At
  1. Phil Caulfield 09/07/2010 07:11 AM
  2. Larry Kantner 10/01/2010 04:32 AM
Topic:
Mortgage / Finance
Groups:
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North Georgia Real Estate
The FHA Mortgage Group
Tags:
fha
mortgage insurance
mip
ufmip

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Ambassador
891,536
Lane Bailey
Century 21 Results Realty - Suwanee, GA
Realtor & Car Guy

Here is my Golden Comment... 

Giveth with one hand and take away with the other...

Sep 02, 2010 03:48 PM #1
Rainmaker
3,029,481
John Pusa
Berkshire Hathaway Home Services Crest - Glendale, CA
Your All Time Realtor With Exceptional Service

Ken - Excellent information on the FHA changes. Thank you for sharing a very good blog.

Sep 02, 2010 05:05 PM #2
Rainmaker
290,107
LaNita Cates
REMAX of Joliet - Joliet, IL

I have a client whom I told this too. He is using Chase and was told by Chase that Chase is already implementing this, before the October 4th date.

Sep 09, 2010 12:55 AM #3
Rainmaker
275,682
Ken Cook
Content, coding, marketing, host. - Marietta, GA
Content Marketer/Creator

LaNita - Chase cannot override the FHA rule so I imagine what they were trying to tell him is if he does not get an FHA casefile ID number assigned (get an offer accepted) prior to 10/4 he will be subjected to the new FHA rule. We're letting applicants know this can affect them if they do not have their fully executed purchase agreement to us prior to 10/4.

Sep 10, 2010 05:19 PM #4
Rainmaker
299,796
Jeff Wilmoth
HomeStar Financial Corporation - Newnan, GA

lol@ Lane!  Thanks Ken and I agree with your rationalization about Chase! 

Sep 21, 2010 12:01 PM #5
Rainmaker
657,067
Joetta Fort
The DiGiorgio Group - Arvada, CO
Independent Broker, Homes Denver to Boulder

Thank you for the details. I've been hearing about this for a few weeks, but seeing it makes about $40 per month difference is good. Some buyers will balk at that, even though they happily pay $100 per month for television.

Sep 29, 2010 04:03 AM #6
Rainer
284,468
Steven Cook
No Longer Processing Mortgages. - Tacoma, WA

As Ken mentioned, the big problem will be for those folks whose DTI ratios are close, because we have to count that MI payment in the calculation.  Thus it effectively drops the value folks will qualify for in their loan.

Sep 29, 2010 09:04 AM #7
Rainer
11,053
Larry Kantner
Wells Fargo Home Mortgage - Newtown, PA

"Here is my Golden Comment... 

Giveth with one hand and take away with the other..."

I feel the same way Lane! Thanks for the quick & easy review Ken

Oct 01, 2010 04:26 AM #8
Rainer
399,242
Jerry Wilson
Paramount Residential Mortgage Group - Corona, CA
California Loan Officer-Retired

We should all be busy Monday morning requalifying our borrowers. I have been trying to prepare all my Realtors for what the net results will be.

Oct 01, 2010 07:02 AM #9
Rainmaker
432,699
Jen Bowman
Keller Williams on the Water - Holmes Beach, FL
Realtor - Anna Maria Island & Bradenton FL

Thanks Ken for explaining it in a clear concise way. I'm glad we have you to help us keep up with the FHA changes.

Nov 04, 2010 01:27 AM #10
Rainer
225,394
Dave Sullivan
Real Estate One - Birmingham, MI
Michigan Realtor with an investor viewpoint

Excellent information on the FHA changes. Thank you for sharing a very good blog.

Jan 02, 2012 12:44 AM #11
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Ken Cook

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