FHA to Reduce Annual Insurance Premiums

FHA TO REDUCE ANNUAL INSURANCE PREMIUMS

Reduction to increase credit affordability and reflects improved economic health of FHA

FHA TO REDUCE ANNUAL INSURANCE PREMIUMS Reduction to increase credit affordability and reflects improved economic health of FHA WASHINGTON – As the nation’s housing market continues to improve, U.S. Housing and Urban Development Secretary Julián Castro today announced the Federal Housing Administration (FHA) will reduce the annual premiums new borrowers will pay by half of a percent. This action is projected to save more than two million FHA homeowners an average of $900 annually and spur 250,000 new homebuyers to purchase their first home over the next three years. Read FHA’s Mortgagee Letter.

Today’s action also reflects the improved economic health of FHA’s Mutual Mortgage Insurance Fund (MMIF). FHA’s recent annual report to Congress demonstrates the economic condition of the agency’s single-family insurance fund continues to improve, adding $21 billion in value over the past two years.

“This action will make homeownership more affordable for over two million Americans in the next three years,” said U.S. Department of Housing and Urban Development Secretary Julián Castro. “Since 2009, the Obama Administration has taken bold steps to reduce risks in the mortgage market and to protect consumers. These efforts have made it possible to take this prudent measure while also ensuring FHA remains on a positive financial trajectory. By bringing our premiums down, we’re helping folks lift themselves up so they can open new doors of opportunity and strengthen their financial futures.”

In the wake of the nation’s housing crisis, FHA increased its premium prices to stabilize the health of its MMI Fund. In addition, the Obama Administration took dramatic steps to safeguard consumers in the mortgage market to ensure responsible borrowers continued to have access to mortgage capital as many private lending sources tightened their lending standards.

Today’s reduction will significantly expand access to mortgage credit for these families and is expected to lower the cost of housing for the approximately 800,000 households who use FHA annually.

FHA’s new annual premium prices are expected to take effect towards the end of the month. Read FHA’s Mortgagee Letter.

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FHFA Announces Loan Limits Remain The Same For 2015

According to the announcement made by the Federal Housing Financing Agency (FHFA) last Monday, conforming loan limits will remain the same throughout most parts of the country for 2015.

FHFA revealed that Fannie Mae and Freddie Mac’s maximum mortgage limit would remain at $417,000 for all single-unit properties in most areas with $625,000 as the maximum for some high-cost areas.

Every year, loan limits are recalculated and set based on the median home values under the terms of the Housing and Economic Recovery Act (HERA).

Though loan limits remain the same in most areas in the United States, 46 counties will be experiencing an increase brought about by the own local conditions especially those higher-cost areas like California, Colorado, Massachusetts, Maryland, New Hampshire, Tennessee, and Washington.

FHFA Reveals Policy Change On GSE Selling Existing REO Properties

A policy change was announced last Wednesday by the Federal Housing Finance Agency (FHFA) allowing Fannie Mae and Freddie Mac to sell existing REO properties at fair market price to any qualified buyer to be determined by the companies.

The new policy only applies to single-family REO inventory of Fannie Mae and Freddie Mac, which according to FHFA are currently 121,000 properties with the two GSEs inventories combined.

In the past, Fannie Mae and Freddie Mac require homeowners or third parties buying the property in behalf of the homeowner to pay the entire amount owed on the mortgage in order to purchase back the house after a foreclosure. However, with this newest directive from the FHFA, homeowners or the third parties representing them are now allowed to purchase back the property under a fair market policy, which as well applies to those buying other REO properties.

“This is a targeted, but important policy change that should help reduce property vacancies and stabilize home values and neighborhoods,” said Melvin L. Watt, Director of FHFA. “It expands the number of potential buyers of REO properties and is consistent with the Enterprises’ practice of requiring fair-market value for those properties.”

Furthermore, the current rules of both GSEs necessitate the former homeowners to wait a minimum of three years following a foreclosure to be eligible for another GSE-guaranteed loan. Aside from this, the rules of the GSE also require that the previous owner uses the property as his or her principal residence.

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Bank of America No Plans On Loosening Up On Mortgage Credit Standards

Although policymakers have been hinting on their desire to open the mortgage credit box allowing more borrowers, the CEO of Bank of America claims that the banking institutions aren’t likely to relax on their credit standards any time soon.

Bank of America CEO Brian Moynihan, who was one of the speakers during the investor conference held in New York, claim that their company, the institution usually listed among the top five mortgage lenders in the country, has a few incentive “to try to create more mortgage availability where the customers are susceptible to default.”

His statements are against the most common complaints today about the mortgage industry, which is their over-tight lending standards that have certainly lessen the amount of potential homebuyers in the market.

Such issue is usually shared by young first-time homebuyers who are facing not only the tightening mortgage criteria but also the difficulty to save on their down payment.

Even with such complaints, Moynihan claims that their bank doesn’t have any plans on offering low down payment options, and instead suggest that these potential homebuyers consider renting than purchasing their own home.

However, the government continues to promote homeownership with both Fannie Mae and Freddie Mac taking steps to encourage lenders to provide more options to borrowers. Last month, Director of the Federal Housing Finance Agency (FHFA) Met Watt revealed that the GSEs are currently working on guidelines for mortgages with loan-to-value ratios between 95 and 97 percent, thus allowing down payments as low as 3 percent. Aside from this, FHFA is working on their representation and warranty framework to lessen the concerns of lenders on buyback risk.

Though this might pacify some individuals who claim that the tight mortgage credit standards have been holding them back from homeownership, Moynihan believes his institution takes a longer view.

“I know that that doesn’t sound good for an instant housing recovery and faster housing markets, but it’s actually good, because in the long term it keeps housing more fundamentally based,” he said.