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FHA premium changes pushed to Oct. 4

Lenders granted more time to revamp systems

The Federal Housing Administration is pushing back the implementation date for new premium structures on FHA mortgage insurance to Oct. 4, after lenders complained that they need more than five weeks to update loan disclosures and computer systems.

FHA Commissioner David Stevens announced last week that upfront premiums for FHA mortgage insurance would be rolled back from 2.25 percent to 1 percent on Sept. 7, while annual premiums would nearly double.

FHA had raised upfront premiums from 1.75 percent to 2.25 percent in April, to cope with rising losses on FHA-guaranteed loans. The Obama administration promised to reduce upfront premiums if Congress gave it the authority to raise annual premiums beyond their statutory limit of 0.55 percent.

Legislation raising the statutory limit on annual premiums to 1.55 percent was approved by lawmakers on Aug. 4 and has been presented to President Obama for his signature.

The day after the Senate’s unanimous passage of HR 5981, Stevens said FHA would roll back upfront premiums to 1 percent on Sept. 7, simultaneously increasing annual premiums to 0.85 percent for borrowers with loan-to-value ratios of up to 95 percent and to 0.9 percent for borrowers with higher LTVs.

But that timetable only gave lenders about five weeks to update loan disclosures and computer systems.

In an Aug. 10 statement, HUD Deputy Assistant Secretary Vicki Bott said the implementation date would be pushed back to Oct. 4 in response to "strong concern" from lenders about meeting the original deadline.

"Since these system changes impact regulatory disclosures, lenders expressed they must have the additional time to implement and test systems," Bott said. "FHA took this feedback seriously and has accommodated the need for additional time."

Under the current premium structure, a borrower taking out a $200,000 loan with FHA’s 3.5 percent minimum downpayment would need to come up with an upfront premium of about $4,500, and would then owe about $1,100 a year in annual premiums.

When the new premium structure takes effect, the same borrower would pay an upfront premium of about $2,000, plus $1,800 a year in annual premiums. The $700 increase in annual premiums equals an additional $58 a month on their mortgage payment.

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