New FHA policies push more toward private mortgage insurance

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More borrowers are shying away from loans backed by the Federal Housing Administration due to policy changes the agency made earlier this year to shore up its capital reserves in an effort to avoid a taxpayer bailout.

The changes include increases in mortgage insurance premiums and the reversal of a policy that had automatically canceled required premium payments after loans reached 78 percent of their original value.

As a result, private mortgage insurance is taking back more market share from the FHA, according to an analysis by Inside FHA Lending.

PMI made up 36.6 percent of primary mortgage insurance written in the second quarter — the highest level since 2008 and up from 30.5 percent a year ago, the publication said.

Source: Inside FHA Lending