The Federal Housing Administration is lowering upfront insurance premiums for borrowers from 2.25% to 1.0% on Sept. 7, while annual premiums will nearly double said Commissioner David Stevens in a letter last week.
The changes are possible after Congress passed HR 5981, giving FHA the ability to raise annual premiums from 0.55% to 1.55%. According to FHA, the higher premiums will add approximately $300 million per month in value to the Mutual Mortgage Insurance Fund at a time when its reserves are perilously low.
“With this authority, FHA is in a better position to address the increased demands of the marketplace and return the MMI fund to congressionally mandated levels without disruption to the housing market,” said Stevens.
However, FHA said it won’t raise annual premiums to the statutory limit initially. Instead, it will boost the current 0.5% annual premium for borrowers with loan-to-value ratios of up to 95 percent to 0.85%, and increase the 0.55% annual premium for borrowers with higher LTVs to 0.90%.
According to Stevens, the upfront and annual premium changes do not apply to the Title I, HECM (FHA reverse mortgage program), HOPE for Homeowners (H4H), Section 247 (Hawaiian Homelands), Section 248 (Indian Reservations), Section 223 (e) (declining neighborhoods), and Section 238(c) (Military Impact areas in Georgia and New York) loans.