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.

Freddie Mac’s Analysts Expect Continued Housing Market Improvement As Economy Grows Stronger In 2015

In just a few weeks, 2014 will be ending and a lot have been wondering as to where the economy is going next year including Freddie Mac’s chief economist and deputy chief economist Frank Nothaft and Len Kiefer.

According to the company’s latest Economic and Housing Market Outlook for the United States, both analysts claim that the market for home purchase mortgages will continue to strengthen especially as the country’s economy improves. This year was certainly a mixed year for the housing market compared to 2013.

The economists foresee a growth rate of 3 percent for the gross domestic product (GDP) in 2015, which marks the second time within the past decade that the GDP has increased 3 percent or higher.

Apart from this, Nothaft and Kiefer have 4 other predictions for the following year:

1. Mortgage interest rates will continue to climb. Mortgage interest rates this year has been fluctuating starting at 4.53 percent, down 4 percent in the opening months before rising again in the summer and declining again. The average 30-year fixed rate is predicted to gradually increase through the year, probably ending about 5 percent with the yields on the 10-year Treasury expected to average 2.9 percentage points in 2015.
2. Growth of home prices will become slower. Though home prices will certainly continue to rise, the pacing will just be moderate. Freddie Mac currently expects for prices to increase by 3.0 percent in 2015.
3. Home sales and construction will start to increase. Home sales and new home constructions have been a disappointment last year but these are expected to improve next year. Freddie Mac foresees the total housing starts to rise by 20 percent from 2014 to 2015, with single-family homes comprising the largest share of the market. Total homes sales are also predicted to rise by around 5 percent over the year, which will mark as the best sales pace within the last eight years.
4. Home purchase mortgages will increase its share however total originations will drop. In 2015, refinance originations are expected to account only for 23 percent of the loan volumes while purchase lending is predicted to fall short of filling that gap, causing an annual drop in originations of 8 percent annual drop to $1.1 trillion.

“Government fiscal drag has turned into fiscal stimulus, lower energy costs support consumer spending and business investment, further easing of credit conditions for business and real estate lending support commerce and development, and more upbeat consumer and business confidence, all of which portend faster economic growth in 2015. And with that, the economy will produce more and better paying jobs, providing the financial wherewithal to support household formations and housing activity,” Nothaft said regarding the forecast.

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.