FHA Announces Mortgage Insurance Changes

Yes, as soon as I advised everyone to wait for FHA’s announcement, it was released. FHA released the mortgagee letter today finalizing the changes in monthly and upfront mortgage insurance.

The changes are effective for any case numbers ordered on or after October 4, 2010. The changes apply to all traditional FHA purchase and refinance mortgages, including FHA and FHA streamlines.

The Up Front Mortgage Insurance Premium will now be one percent of the base loan amount. The monthly mortgage insurance will depend on the loan-to-value (LTV) ratio. Loans with an LTV of 95 percent or less will be subject to a monthly mortgage insurance payment of 85 basis points. Loans with an LTV exceeding 95 percent will be subject to a monthly mortgage insurance payment of 90 basis points. These changes only apply to amortization periods greater than 15 years. Guidelines for loans with amortization periods of 15 years or less remain unchanged.

Transfer Fee Battle is Heating Up

A few years ago, builders started imposing transfer fees on the homes that they sold. Most of the buyers didn't care because the fee didn't show up until they sold the house and then it was the new buyer's responsibility to pay for the fee. But things are starting to heat up in Washington as these transfer fees are being further investigated. Transfer fees have been more accepted in the past as they were usually found in the selling of condominiums and smaller homes where the funds would be used to pay for the maintenance and general upkeep of the housing project. The issue that has everybody up in arms over is the fact that these new transfer fees are doing nothing other than lining the pockets of builders (often for 99 years).

In a booming real estate market, we would probably see these fees getting swept under the rug. But in a weaker economy, everything is under the spotlight, especially in the real estate market. With so much opposition and press on transfer fees, we could see some federal regulation that would ban these fees very soon. The FHA has already proposed a rule that would restrict Fannie Mae and Freddie Mac from purchasing homes with these types of fees. I'm sure we will see more on this very soon.