www.lasvegasmtg.com Report: FHA Annual Mortgage Insurance Increase
by John Le Francois
www.lasvegasmtg.com Report: FHA Annual Mortgage Insurance Increase will be enacted on 04/18/2011 and will increase from .90 (current rate) to 1.15%. In 2010 Congress provide FHA the ability to raise the annual monthly premium from .55% to 1.25% of the loan amount. This was to cover the required mandate that there be a 2% reserves of all existing FHA home loans to cover any losses due to Foreclosures or Short Sales. This will be the third increase in less then 12 months and it may reach the maximum allowed fee set by Congress by the end of the year.
The main reason for the increase requirement is due to the ever increasing role the FHA loan has in the Mortgage Industry. With tightening of quidelines for Fannie Mae and Freddie Mac, larger down payments requirements, higher FICO scores and lower DTI restrictions these types of loans are becoming more costly for the owner/occupied home buyers. In 2005 FHA home Loans only represented 5% of all home loans and now in 2011 it is 30% of all transactions.
Fannie Mae and Freddie Mac have received Billions of Dollars in government bailouts to keep them from failing, there is no life line being offered to HUD for the FHA program. Many opponents of the HUD FHA loan program are portraying FHA loans as the next sub-prime loans because of the low down payment requirements. Sub-prime loans that were offered by Fannie Mae and Freddie Mac before the Mortgage Meltdown are running at 24% default rate VS. 5% FHA default rate.
In a recent interview by Larry Kudlow and Suze Orman pitching her new book "The Money Class" she states"anyone purchasing a new home with 3.5% down FHA Loan is making the worst economic mistake they could ever make." Suze is a proponent of saving up and putting 20% down on a new house. I know a lot of people that put 20% down or more on a home in Las Vegas, and they are still underwater and have had their home foreclosed on or short sold their home just the same!
The reality is that the amount of down payment does not insure the risks of defaults anymore, There are 5 key elements that Desktop Underwriting will use to evaluate the risk of each borrower for a FHA Loan.
1. Credit History (Score)
2. Employment/Income History
3. Available Liquid Assets
4. Property type.
5. Debt to Income