Industry NewsMortgage

FHA: Pay less upfront, more later?

HUD wants to raise annual rates
Published on Feb 2, 2010

If Congress goes along, the Obama administration proposes to slash upfront premiums on FHA mortgage insurance to 1 percent, down from 1.75 percent today, but would offset that reduction with a 70 percent increase in annual premiums.With FHA's capital reserve ratio falling below the 2 percent minimum set by Congress, the Department of Housing and Urban Development (HUD) last month announced several steps to cut the mortgage insurance program's losses and raise revenue.Annual premiums are already at their statutory limit -- 0.5 percent for borrowers with loan-to-value (LTV) ratios of up to 95 percent, and 0.55 percent for higher LTVs. But HUD has the authority to raise upfront premiums all the way to 3 percent without seeking permission from lawmakers.HUD announced last month that it planned to hike upfront premiums for FHA borrowers to 2.25 percent for loans assigned case numbers on or after April 5.In addition, HUD said it would reduce allowable seller concessions from 6 percent to 3 p...

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