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:
- 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.
- 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:
- Down payments will remain at 3.5 percent. This will continue to attract first time homebuyers.
- No risk-based pricing on premiums.
- Underwriting to remain generous to key items like debt-to-income ratios if they are within reason.
- 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…