Today I'm going to be very mortgage-focused. There are a number of changes coming soon to FHA loans that you really need to be aware of because they directly affect how you write up purchase contracts when asking a seller to pay all or part of a buyer's closing costs. If there's a constant in this business it's change!
Let's dive right in:
FHA Revision to Seller Concession Policy & Increases MIP Premiums:
As your trusted source for mortgage industry news, I'm sending you the following information as it will effect your FHA buyers.FHA Notice on Revised Seller Concession PolicyLast Thursday, HUD published a request for comments (due in 30 days, by March 26) on their revised changes to FHA policies on seller concessions. As a reminder, HUD initially published a proposal back on July 15, 2010 to reduce the limit on seller concessions from the current 6% to 3% (citing an interest to match the conventional market). The new proposal, which has been adjusted to lessen the impact on lower-balance loans, is to limit seller concessions as follows:• Reduces the amount of permitted seller concessions to 3% of the purchase price or $6,000, whichever is greater; • Further limits seller concessions to never exceed the borrower's actual closing costs; • Redefines what can be considered as acceptable closing costs to be paid by seller concessions to: closing costs, prepaid items, discount points, up-front MIP, and any interest rate buydown. No longer permitted are "payment supplements" such as HOA/condo fees, mortgage interest payments, and mortgage protection plans; and • Changes the definition of "interested third party" by adding lender, mortgage broker and settlement company to the list. Under the regulation, payments by these parties must be included in the amount of seller concessions.
FHA Increases Mortgage Insurance Payments, Increasing Costs for Buyers:
On February 27, the Federal Housing Administration (FHA) announced that it is increasing its annual mortgage insurance premiums and upfront premiums in two phases. First, for loans with case numbers assigned on or after April 1, 2012 the FHA is increasing by 10 basis points (the current 1.15% of the loan amount will increase to 1.25%) the annual mortgage insurance premium, and is increasing upfront insurance premiums by 75 basis points. (increasing from the current 1.0% to 1.75% financed in to the loan amount)The changes are designed to encourage the return of private capital to the residential mortgage market while supplementing the FHA's Mutual Mortgage Insurance Fund, which has fallen below the congressionally mandated two percent reserve threshold. At least one report recently suggested that based on current home price and default projections the fund will become insolvent without action. The increased premiums are projected to contribute more than $1 billion to the FHA's mortgage insurance fund, and on average will cost new home buyers $5 per month.
Streamline Refinance Decrease in Annual and Up-front MIP:
On all Forward Streamline Refinance transactions that are refinancing an existing FHA loan endorsed on or prior to May 31, 2009, the Annual MIP will be 55 bps, regardless of base loan amount. On these same loans, the UFMIP will decrease from 1 percent down to .01 percent of the base loan amount. These changes are effective for case numbers assigned on or after June 11, 2012.
If you have any additional questions about these changes or how they will effect your buyers, please feel free to contact me today.
Let's have a great week!
Your Partner in Greater Success,
Bill Zimmerman
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