FHA mortgage insurance to increase 25 basis points

Just received this heads-up from a local lender regarding an upcoming FHA mortgage insurance increase: Effective April 18th mortgage insurance on FHA loans to incur a 0.25% increase.

Here’s a link to the HUD letter: Mortgagee Letter 11-10

Or, if you’d prefer not to read the entire HUD letter: “This Mortgagee Letter introduces a 25 basis point increase to the Annual Mortgage Insurance Premiums for forward mortgage amortization terms. The increase in Annual Mortgage Insurance Premiums for forward mortgage amortization terms is effective for case numbers assigned on or after April 18, 2011.”

Depending on the borrower’s loan amount such an increase could represent a hefty addition to one’s monthly payment.  One of my lender contacts had this to say: "Currently, with a 3.5% down payment, a borrower is paying .90% of the loan amount in annual MI.  This is going to increase to 1.15%.  Additionally the mortgagee letter reads that all FHA case numbers that are not insured by the 18th of April will be automatically cancelled.  This translates to mean that a lender cannot pull an FHA case number on a short sale today to protect the client from the rate increase.  The loan has to fund and be insured by HUD by the 18th."

 

2 comments

  1. Rollout

    3.5% down payments?
    We haven’t learned a damn thing have we?

  2. Tam Ngo

    Traditionally, intrest rates and home prices have an inverse relationship. I’m hoping that this 25 basis point increase does not cause a decrease in home prices to drive sales. Although, I must say, we’re in interesting times and it’s hard to tell if this would even have any affect.

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