January 26, 2010
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More FHA News: HUD increases upfront Mortgage Insurance Premium;
announces additional changes forthcoming
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On Wednesday, January 20, 2010 FHA Commissioner David Stevens announced
several upcoming changes designed to strengthen FHA’s capital reserves,
which have fallen well below acceptable levels due to rash of mortgage
defaults. In any event, these changes were widely expected and so far,
there have been no additional surprises.
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Mortgagee Letter 2010-02 – increases Upfront MIP
Thursday, January 21, FHA released Mortgagee Letter 2010-02 which
increased the upfront mortgage insurance premium from 1.75% to 2.25%.
This is very insignificant for homebuyers, but huge for bolstering FHA’s
capital reserves. For a $200,000 sales price with minimum 3.5%
downpayment, the increased upfront MIP makes a $5/month difference in
the monthy payment. There is no change to the monthly MIP. The change
goes into effect with new FHA Case numbers assigned on or after April 5,
2010.
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More to come…
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Commissioner Stevens also announced reduction in seller contribution
from 6% down to 3%. However, this will not likely go into effect until
early summer. The good news is that there was no mention of increased
down payment requirements.
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Market and Interest Rate News
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Market conditions and bond prices have improved slightly thus keeping
mortgage rates in check. Rates continue to hover in 5% range for 30
year fixed rate versions. Bond prices are showing an upward trend which
if continues would help pressure rates lower. However, as we all know,
any wind can blow and change the course. We can breath easy at the
present but not get too complacent. Buyers that have been fence sitters
should take heed and consider that the Homebuyer Tax Credit will expire
4/30/2010 and that these rates will not remain low forever. It will be
interesting to see how home sales develop from now through April 30th.
With rates as low as they are and the impending tax credit expiration,
we should see the best months of 2010 and possibly an indicator of how
the rest of the year may go.