FHA-insured loans to cost more
WASHINGTON – Feb. 15, 2011 – Effective April 18, the monthly mortgage insurance premium paid on FHA mortgages will go up about $30 per month for an average borrower, federal officials said yesterday. The upfront mortgage insurance premium paid at closing, however, will remain at 1 percent of the mortgage amount.
The U.S. Department of Housing and Urban Development (HUD) that oversees FHA says it has two reasons for the increase. First, FHA’s capital reserves are currently below a mandated minimum set by the legislature, and the fee increase will help the agency comply with the law. Second, HUD hopes to steer more buyers away from FHA loans and into the private sector by making an FHA loan less desirable.
To create the increase, HUD will boost the monthly mortgage insurance premium by 25 basis points – to 115 basis points – on FHA-backed single-family loans with loan-to-value ratios above 95 percent.
Fannie Mae announced it is reviewing the rule it put in place earlier this year requiring lenders to do a second credit check shortly before closing.
The goal of the rule is to identify new debt that might undermine an applicants ability to pay, but for both homebuyers and lenders, the second check is problematic. The search can uncover a short-term debt medical bills that insurance is likely to pay that would nevertheless derail a purchase.
We keep telling people: Dont open new accounts. Dont close existing accounts. Dont do anything whatsoever that will alter your credit situation, says mortgage brokers . But there will be people who cant avoid increasing their credit card balances, or already have, and thats where the problems will crop up.
Lenders are particularly concerned about the rule because Fannie can require them to buy back loans in default up to two years after closing if there is evidence that the borrower had more debt than was disclosed at the time of closing.
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