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Tuesday, March 06, 2012

FHA Reduces Fees to Encourage Refinancing

by Calculated Risk on 3/06/2012 03:05:00 PM


Today, Acting Federal Housing (FHA) Commissioner Carol Galante announced significant price cuts to FHA’s Streamline Refinance Program that could benefit millions of borrowers whose mortgages are currently insured by FHA. Beginning June 11, 2012, FHA will lower its Upfront Mortgage Insurance Premium (UFMIP) to just .01 percent and reduce its annual premium to .55 percent for certain FHA borrowers.

To qualify, borrowers must be current on their existing FHA-insured mortgages which were endorsed on or before May 31, 2009. Late last month, FHA also announced it will increase its upfront premiums on most other loans by 75 basis points to 1.75 percent. In addition, FHA will raise annual premiums 10 basis points and 35 basis points on mortgages higher than $625,500.
Currently, 3.4 million households with loans endorsed on or before May 31, 2009, pay more than a five percent annual interest rate on their FHA-insured mortgages. By refinancing through this streamlined process, it’s estimated that the average qualified FHA-insured borrower will save approximately $3,000 a year or $250 per month. FHA’s new discounted prices assume no greater risk to its Mutual Mortgage Insurance (MMI) Fund and will allow many of these borrowers to refinance into a lower cost FHA-insured mortgage without requiring additional underwriting.
A comment from mortgage broker Soylent Green is People:
Lenders were limited to refinancing only when a “benefit to borrower” existed. It was a pretty high wall to climb to make deals work. For example, a person with a 4.5% loan couldn’t refinance to 3.75% because the Mortgage Insurance was going to more than double. Now, with a .55 Mortgage Insurance limit, the refinance deals will really start to explode.

The down side is anyone after June 2009 is screwed. If you closed July 2009 to present day, any refinance they want to transact will have mortgage insurance RISE from 1.15 to 1.25!

Can’t wait to see everything in writing.