Mortgage Insurance Policy Changes

The Federal Housing Administration (FHA) is changing up-front and monthly Mortgage Insurance (MI) on FHA case numbers dated October 4, 2010 or later. Currently the up-front fee is charged at 2.25% and the monthly fee is based on term and LTV. The up-front fee is being reduced to 1%. The monthly fee is being increased. The matrix below gives the full breakdown:

Upfront Mortgage Insurance Premium (MI)

Weekly Rate Update: September 13th-17th Mortgage Rates

Welcome back, I have prepared a brief summary of mortgage rates for the most common loan programs. As you know, rates can vary greatly based on credit scores and loan to value but, for this weekend, the rates below are realistic.

Conv 30 Year Fixed

Rate Disc. Points APR Payment Closing Cost
4.125% 0.750% 4.232% $1,212 $3,640 Details
4.375% 0.125% 4.304% $1,230 $2,078 Details
4.500% 0.000% 4.418% $1,248 $1,765 Details

But wait, there's more

Low Inflation is Making Mortgage Rates Better

After rising for two weeks, mortgage rates moved a little lower this week. Slower than average economic growth and low inflation persuaded investors to purchase bonds, including mortgage-backed securities. Following three months of declines, mortgage rates appear to be settling into a range so far in September.

The most significant economic data released during the week was the monthly inflation reports. Rising inflation erodes the value of bonds and pushes mortgage rates higher. In the current economic environment, higher inflation is not a concern, and some investors are more worried about the risk of inflation falling too low. The Fed is generally most comfortable when core inflation is rising at an annual rate between 1.0% and 2.0%. In August, the core Consumer Price Index (CPI) increased at a low 0.9% annual rate. While this level is probably not low enough to prompt new action from the Fed, investors will be closely watching what the Fed has to say about inflation rates at next Tuesday's meeting.

Hearings began this week on the role of government in the housing market, including the future of Fannie Mae and Freddie Mac. The debate is expected to be lengthy, and the Obama administration has stated that it will produce a proposal in January. There is general agreement that government involvement has created a more liquid market for mortgages, which has resulted in lower mortgage rates. The early consensus is that there is an appropriate role for government in the housing market, but that proper safeguards must be established to reduce the future risk to taxpayers. In any case, changes are expected to be phased in gradually over a period of years.

Bank Repossessions Hit Record High in August

Though mortgage defaults have been falling for several months, bank repossessions (where borrowers actually lose their homes) have been climbing ever higher as mortgage lenders continue to work through their backlogs. They reportedly reached a new all-time high last month, according to data set to be released by RealtyTrac tomorrow (via Realty Check)

Principal Write Downs and Debt Forgiveness Changes

The Department of Housing and Urban Development (HUD) and the Department of the Treasury (DOT) announced improvements to the existing Making Home Affordable Program (MHA) and Federal Housing Administration (FHA) refinance program that will give a greater number of responsible borrowers an opportunity to remain in their homes. These improvements are developed to sustain homeownership by providing borrowers, who owe more on their mortgage than the value of their home, a chance to refinance into an affordable FHA loan. This opportunity gives borrowers who are current on their mortgage to qualify for an FHA refinance loan given that the lender or investor writes off the unpaid principal balance of the original first lien mortgage by at least 10%.

FHA NEP Highlights

Rates Remain low, For Now...

If you have not looked into refinancing yet, WHY? Historic low rates continue to last longer than anyone has expected...

Rates are now the lowest that they have been in more than 40 years!. While there are many complicated factors that go into determining rates, a change in any one of those factors could happen at any time. In particular, what is happening in the European markets has been a major factor in the most recent rate drop. That could change at any time and rates would start to rise. If you currently pay more than 4.675% on your existing mortgage, whether it is FHA or Conventional, you should not delay talking to our professional staff here at Valley West Mortgage! Once rates do start to rise, it is not likely to be a slow and controlled increase. Waiting for rates to drop further is a big risk to take since that is not very likely at this point.

Home buyers should not waste any time either! Even if you don't have a particular property selected yet, you should be getting your credit approval done now. Especially if you are looking at REO or Forclosure properties. The bank owned homes will require a credit approval with any offer that your Realtor submits for consideration. Since the process takes more time than it used to, there is no reason to wait.

Our Mortgage Professionals are ready to help you to acheive your goal of Home Ownership right now. Las Vegas home buying opportunities are fantastic combined with the current drop in rates, it does not make sense to wait. If you want to take advantage of refinance rates, a general rule of thumb would be, if you can lower your montly payment on the Principal and Intrest portion by $100 per month or more, you should be taking action.

Either way, Purchase or Refinance, we are ready to help! Call us right away at (702) 696-9900 or toll free at (888) 931-0007.

Congress has passed H.R. 5981 - FHA Mortgage Insurance Changes...

This bill gives FHA the authority to adjust its annual mortgage insurance premiums.

While there is both good news and bad news for FHA mortgage applicants, this premium restructuring will help to keep FHA stable in the long run. The up-front mortgage insurance has been lowered considerably. This will mean a smaller bite out of consumer wallets in order to close the loan they have applied for. With todays stricter underwriting to qualify, there is less risk of default by new mortgage holders so this move makes sense. Now for the trade-off...

On the other side of the equation, the cost of the monthly amount of mortgage insurance will increase. This could be interpreted as FHA reserves being replenished at a slower rate than before passage of this bill. With the more stable underwriting lowering the risks, consumers can save some of that money that was needed just to close their loan. You will still end up spending that money but, it will be as a slightly higher monthly payment amount. While this is a fair trade off for many, some folks who are right at the limit for the maximum monthly payment they can qualify for, will have to find a way to lower their loan amount to offset the impact of the higher monthly mortgage insurance premium. This change will be effective for all FHA loan applications started on or after September 7th, 2010. While President Obama has not officially signed the bill into law, no veto is expected.

If you are considering Strategic Default - Don't!

Lenders are starting to crack down on "Strategic Defaults".

Fannie Mae has announced stiffer penalties to consider if you decide to walk away from a mortgage that you can afford to pay. Starting in the fall, Fannie Mae will disqualify borrowers for a period of seven years if they choose to default on their mortgage even though they have the ability to pay. Fannie Mae also plans to take such borrowers to court to recover loan losses resulting from this type of default.

There is a bill working it's way through Congress that would also prevent you from getting an FHA insured mortgage if you have previously "walked away" from a mortgage. Since it makes sense that you would be viewed by Lenders as a higher risk after taking this action, I think we can expect this bill to pass. We have blogged before about the possibilities of a Short-pay Refi or a Short sale so if you are considering Strategic Default it is time to review other avenues. USA Today has a more in depth article on Strategic Default which will fill you in on the upcoming changes. Click here to read the USA Today article.