FHA CHANGE in Two Weeks

By
Industry Observer with No Longer Processing Mortgages. MLO #293441 expired

FHA CHANGE in Two Weeks

 

One of the overlooked changes that will affect all FHA borrowers, and will Annual Percentage Ratemake things even more challenging in the future, as loan officers have to explain to the borrower why their APR is so much higher than their stated rate.

If you are considering having your buyer (or are a buyer planning to) use an FHA loan in the next month or so, you should get to lender and get  pre-approved at this time, so the FHA case number can be assigned before the change takes place on any case numbers assigned after June 2, 2013.

 Here is what the APR interest rate change will look like for those with their FHA rate locked in before and after the June 2nd change. 

 

Stated Rate

Current APR – MI drop@78%

APR with MI throughout loan

3.75

4.767

5.321

4.00

5.043

5.575

4.25

5.318

5.829

4.50

5.594

6.083

 

 From this you can see that it appears the APR will be going up about 0.5% -- just from the fact that MI will no longer be dropping off the loan at 78%.  How many people are going to appreciate what the government has done for them here?

That difference, on a $240,000 loan, with the up-front Insurance fee of $4,200.00 added in, is over $30,000 in additional fees over the life of the loan, as compared to the same loan with the mortgage insurance dropping at 78%.

Posted by

 

Steven CookSteven T Cook
Loan Officer, MLO-293441      

Cascade Pacific Home Loans  NMLS ID 76988
720 S 333rd St  Federal Way  WA  98003
Office 253-874-1111 | Cell 253-677-1064
Toll Free 1-800-874-8760 | fax 253-295-3901
scook@cphloans.com | www.bayeq.com

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Comments (14)

George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Steven you did an excellent job of explaining this, and the chart really makes it easier to understand.

May 22, 2013 09:42 AM
Steven Cook
No Longer Processing Mortgages. - Tacoma, WA

George -- thank you for stopping by and commenting.  Your write up was also very well done.

May 22, 2013 10:06 AM
Ralph Janisch ABR CRS Broker
Janisch & Co. - Conroe, TX
Selling Northwest Houston to good people like you!
Great info! Thanks for explaining it for us!
May 22, 2013 11:37 AM
Than Maynard
Coldwell Banker Heart of Oklahoma - Purcell, OK
Broker - Licensed to List & Sell - 405-990-8862

Another, stupid, reactive change by our federal government (call them quasi, if you well, they are government). Yes, most loans only go 3-7 years, but keeping PMI on a loan for the life? Just plain stupid/greedy.

May 22, 2013 10:01 PM
Joe Petrowsky
Mortgage Consultant, Right Trac Financial Group, Inc. NMLS # 2709 - Manchester, CT
Your Mortgage Consultant for Life

Great job explaining the math, very confusing for almost all that we are doing a mortgage for.

May 22, 2013 10:02 PM
Rob Arnold
Sand Dollar Realty Group, Inc. - Altamonte Springs, FL
Metro Orlando Full Service - Investor Friendly & F

Just one more step towards making it harder for first time buyers to enter the market. Thanks for the detailed numbers.

May 22, 2013 10:58 PM
Suzanne Otto
Six Twenty Designs - Lansdale, PA
Your Montgomery County PA home stager

Great explanation Steven. Seems very greedy to me to have to have MI throughout the entire life of the loan.

May 23, 2013 12:51 AM
Steven Cook
No Longer Processing Mortgages. - Tacoma, WA

Jeanne & Ralph -- you are welcome.  Glad you found it helpful.

Than -- but according to them, they have to do it to get their reserves back in line with actuarial recommendations.   My problem is that they are failing to understand Econ 101 -- that higher prices will drive clients to other options, so they will have fewer people paying in, not more.  And except for those who lost their homes, not sure if we are still in the 3-7 year mode or if it has increased past the point where the MI would normally drop off.

Joe -- trying to help people understand the consequences, so they can hopefully avoid them.

Rob -- you are right about that!  More of them will have to move over to conventional lending (assuming they don't raise their PMI much higher.)

Suzanne -- as I noted above, they claim it is to rebuild their reserves, but not sure how that will work, if very few are using their product.

May 23, 2013 02:59 AM
Rene Fabre
First American Title - Seattle, WA
Marketing in the Digital Age

Hi Steven... Thanks, I get it now... great explanation!

May 23, 2013 09:16 AM
Steven Cook
No Longer Processing Mortgages. - Tacoma, WA

Rene -- glad I could clear it up for you.  Hope your upcoming weekend is fantastic!

May 23, 2013 10:06 AM
Fred Griffin Tallahassee Real Estate
Fred Griffin Real Estate - Tallahassee, FL
Licensed Florida Real Estate Broker

With these Loan Shark APR's, the FHA Mortgage will become the "Payday Loan" of the Mortgage Industry.

May 24, 2013 01:10 PM
Steven Cook
No Longer Processing Mortgages. - Tacoma, WA

Fred -- they will have to keep their interest rate very low to keep lenders from having to classify their loans as "high interest" and having to provide extra paperwork to the clients.

May 25, 2013 04:11 PM
Carmela Jacobs
Carmela Realty - Thousand Oaks, CA
Ventura Co., Los Angeles Co., CA, & Global Realtor

Steven-

I suppose the buyer can refinance into a non-FHA if they plan to stay in the home for the full 30 years.  However the cost associated with doing so will be incurred by the homeowner. So unnecessary if the MI would just drop off at 78% as it normally would.

 

May 31, 2013 05:00 AM
Steven Cook
No Longer Processing Mortgages. - Tacoma, WA

Carmela -- that would be one option - and if they are willing to pay about a quarter point extra, a good loan officer may be able to get most of the costs covered, if they don't have the cash up front for the refinance.

Jun 01, 2013 11:43 AM