FHA's Plan to Avoid Bailout

In order to avoid a bailout next year, the Federal Housing Administration is making some changes that will affect new home-buyers.  If a bailout IS needed, it will be the first one is a 78-year history. The upcoming changes I want to highlight are:

  1. Annual Insurance Premium Increase – Borrowers can expect a .01 percent increase  (10 points) which would equate out to an additional $13 a month. There would also be a retraction on the term in effect that allows new borrowers to cancel premium payments after the loans reach 78 percent of their original value.
  2. Boosting Sales of Distressed Loans – Increasing the amount of homes sold per quarter in addition to helping borrows avoid foreclosure while reducing the FHA’s costs. They will also provide pre-purchase counseling to borrows o help avoid foreclosure.

Some of the policies that WILL remain in effect are:

  1. Down payments will remain at 3.5 percent. This will continue to attract first time homebuyers.
  2. No risk-based pricing on premiums.
  3. Underwriting to remain generous to key items like debt-to-income ratios if they are within reason.
  4. Seller concessions to help buyers with closing costs, etc

According to recent annual reports, the FHA may still have enough cash on hand to offset their deficits so they insist a taxpayer bailout will not be needed as this would also discourage homebuyers. As of now, the proposed changes won’t affect most. Read more…

Norma Mardelli

Top 2% Coldwell Banker Internationally Luxury Homes Specialist Representing: Pasadena, San Marino, La Cañada, South Pasadena, Arcadia, Sierra Madre, Altadena, San Gabriel, Alhambra, Glendale, La Crescenta