Real Estate Home Loans in Boise Idaho, Waterstone Mortgage - Prime Equity Group

By Dean Tucker, Waterstone Mortgage - Prime Equity Group in Boise Idaho

This morning the FHA announced a series of changes designed to protect the federal agency that has emerged as the cornerstone of the mortgage market as the housing sector wobbles toward recovery. 

Consumers, Lenders and Realtors may find some of these new rules painful - but necessary.  With FHA hovering around 40% of all new loan originations, even these small changes have a major impact on the continued health of the housing market.

Mortgage insurance premium (MIP) will be increased to build up capital reserves and bring back private lending.

• The first step will be to raise the up-front MIP from 1.75% to 2.25% and request legislative authority to increase the maximum annual (paid monthly) MIP that the FHA can charge.

• If this authority is granted, then the second step will be to shift some of the premium increase from the up-front MIP to the annual MIP.

• This shift will allow for the capital reserves to increase with less impact to the consumer, because the annual MIP is paid over the life of the loan instead of at the time of closing

• The initial up-front increase is included in a Mortgagee Letter to be released tomorrow, January 21st, and will go into effect in the spring.

Update the combination of FICO scores and down payments for new borrowers.

• New borrowers will now be required to have a minimum FICO score of 580 to qualify for FHA's 3.5% down payment program. New borrowers with less than a 580 FICO score will be required to put down at least 10%.

• This allows the FHA to better balance its risk and continue to provide access for those borrowers who have historically performed well.

• This change will be posted in the Federal Register in February and, after a notice and comment period, would go into effect in the early summer.

Reduce allowable seller concessions from 6% to 3%

• The current level exposes the FHA to excess risk by creating incentives to inflate appraised value. This change will bring FHA into conformity with industry standards on seller concessions.

• This change will be posted in the Federal Register in February, and after a notice and comment period, would go into effect in the early summer.

We sincerely hope you found this update both timely and informative. If you have any questions please feel free to call Dean at 208-388-0500.