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FHA loan changes in the near future..... Part 2 of 3 - Upfront Mortgage Premiums

FHA loans

FHA loans will no longer have mortgage insurance premiums based on a combination of loan-to-value ratios and credit scores. This actually starts today, October 1, 2008, and rescinds Mortgagee Letter 2008-16. This is for all FHA mortgages that have FHA case number assignments as of today.

So, what does this mean? Well, we won't have a chart of like 18 different options, which was tedious at times, depending on the borrowers credit scores. It's now pretty simple and basic.

Overall, this is in effect through September 30th, 2009. It will be revisted prior to that to decide whether changes should be made, depending on the mortgage insurance pool & if it lost monies.Changes will be effective at the beginning of the fiscal year. FHA's fiscal year begins 10/1 and ends 9/30.

Upfront Mortgage Premiums : FHA loans will have an upfront premium in an amount equal to the following percentages of the mortgage as listed below : (these are all applied to the base loan amount)

  • Purchase money mortgages & Full-credit qualifying refinances = 1.75 percent
  • Streamline refinances (all types) = 1.50 percent
  • FHA Secure (not sure about the new FHA Hope Program) = 3.00 percent

Annual Premiums : (these are monthly mortgage insurance - MMI) Below is a chart to show the difference between the LTV (loan to value) and the term of the mortgage.

<>

LTV

Annual for Loans >15 years

LTV

Annual for Loans <= 15 years

<= 95

.50

<= 90

No monthly MI

>95

.55

>90

.25

Highlights regarding FHA's Mortgage Insurance Premiums :

  • All FHA loans to borrowers with a credit score must be risk-classified by FHA's Total Mortgage Scorecard.
  • Those borrowers with credit scores below 500 and with a LTV ratio equal to or above 90 percent are not eligible for FHA-insured mortgage financing.
  • Borrowers without credit scores will need to be manually underwritten based on the credit criteria described in Mortgagee Letter 2008-11.
  • Eligibility for delinquent mortgagors under the FHA Secure initiative is described in full in Mortgagee Letter 2008-13.

** FYI -- In the previous Upfront Mortgage Insurance Premiums that were determined in Mortgagee Letter 2008-16, first-time homebuyers were allowed to take a HUD approved counseling course to reduce their upfront mortgage insurance. Since the new premiums are in effect now with 1 kind of percentage, this does not apply now. **

Overall, it is extremely important for all loan officers and lenders to read Mortgagee Letter 2008-22, because there are 5 pages of new rules and guidelines. What I listed here were the basics of the new changes. The mortgagee letter also talks about the defining of the "decision credit score", if you have multiple borrowers, about non-traditional credit, and the underwriting rules when using FHA's total mortgage scorecard. That last section is very detailed and very important.

For your FHA mortgage needs, please don't hesitate to contact me.

FHA Loan changes for 2008 - 2009

Part 1 - Down Payment Assistance Programs

Part 2 - Upfront Mortgage Insurance Premiums

Part 3 - Down payment and Maximum Mortgage Requirements

- FHA Loans - FHA Mortgages - Conventional Loans - VA Loans -

Experience & Knowledge at its BEST !!!

____________________________________________________________________________________

For more information on FHA loans, please go to this link. The FHA Expert

For more information on how you can obtain your dream home, please click here : Mortgage Financing Options

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags !!!!!


Copyright © 2008 by Jeff Belonger

Posted Wednesday Oct 01
( 10/01/08 11:55PM ) — Central Oregon Real Estate | Thesa Chambers, Broker

Jeff - I had heard this was coming - this explains it well - thank you

( 10/02/08 12:19AM ) — Randy L. Prothero - Hawaii REALTOR®

Thank you for the explanation.  Do you think that the new bail-out bill will have further changes for FHA?

( 10/02/08 12:45AM ) — Fred Chamberlin - Eugene/Springfield's #1 Experienced FHA Mortgage Consultant

Excellent explanation for a complicated change Jeff. Keep the information coming.

( 10/02/08 07:20AM ) — Cynthia Tilghman, Realtor® Onslow County NC Home Specialist

Hi Jeff,
Not sure I understand all this but thanks for keeping us informed.

( 10/02/08 08:11AM ) — Larry Bettag Illinois FHA Specialist

J...I haven't been following this as much as I should.  I wasn't (I hate to admit it) aware of this.  I'm forwarding this to my LOs.  Thanks for your expertise.

( 10/02/08 08:31AM ) — Jeff Belonger -- The FHA Expert.com -- FHA Loans -- FHA mortgages -- Mortgages

 


THESA...... my pleasure and thanks for stopping by. Just wondering if the average loan officer will be on top of this.....


 


RANDY.......  my pleasure. I don't think the bailout will have any influence on FHA, considering that it has been successful since it's inception in 1934.  The structure of FHA is totally different than that of Fannie and Freddie. The only effect that it might have is slow down in bringing the DPA programs back. Congress might fight this more now, which would be a huge mistake for our current market.  Just my opinion..


 


FRED......  thanks for the polite compliment and for stopping by.


 


CYNTHIA...... that's why you should leave this up to your preferred loan officer or possibly me someday. ;o)


 


LARRY...... my pleasure, that I could help some.  I will be writing my 3rd part later today or tomorrow in regards to the required downpayment.  thanks


 

( 10/02/08 08:40AM ) — Portland Oregon Real Estate Broker * Jennifer Bukaty *

One question professor Belonger...


"Those borrowers with credit scores below 500 and with a LTV ratio equal to or above 90 percent are not eligible for FHA-insured mortgage financing."


Is that an 'and' or an 'or'? So if a borrower has a credit score below 500 but a better LTV ratio, would they qualify - all other things being equal?


You are so freaking good at writing this stuff!

( 10/02/08 08:45AM ) — Wayne Frazier

Oh, the times they are a changing!


In todays day and age, EVERY Lender, Broker, and Originator should be continuosly monitoring FHA and HUD's sites for changes.

( 10/02/08 08:58AM ) — Karl Peidl

Another great post Jeff.  It is our obligation to stay on top of these changes so we can properly inform our clients and business partners.  Personally, I saved two clients a combined $2500 in upfront mortgage premiums by getting their FHA case numbers assigned on Monday and Tuesday.  One of these clients had a seller dragging their feet about signing a contract.  We were able to work these changings into our negotiating tactics and motivate the seller to move forward.

( 10/02/08 09:15AM ) — Kent Simpson REALTOR®, CNS®, AHS®, RECS®

As the rules change, it sure is nice to have someone explain the new guidelines and requirements in a manner that is easily understood--thanks Jeff!

( 10/02/08 09:51AM ) — Donna Harris, ASP

Is this good or bad?  You didn't really give your opinion, just the facts.  Is this going to be a good impact for borrowers, or a bad one?  I coudn't see it with what you said.

( 10/08/08 06:07PM ) — Tom Jericho

You must be the most intensely up-to-date FHA rep. Good stuff.

( 10/13/08 09:10AM ) — Randall Schrader

Jeff, You know the bulk of conventional loans at 100% LTV over the last few years were 80/20 loans, thereby avoiding PMI.  All FHA loans have mortgage insurance policies, so they can insulate themselves from much of this.  The very slight increase in MI tells me they are doing pretty well.

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