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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.
