FHA Price Cuts to Save Refinancing Borrowers $3K Annually

The Federal Housing Administration will lower its upfront premiums for mortgage insurance and reduce annual fees for certain borrowers who qualify for streamlined refinancing into today’s historically low interest rates.
Beginning June 11, 2012, the FHA said it would lower its Upfront Mortgage Insurance Premium (UFMIP) to .01 percent and reduce its annual premium to .55 percent for certain FHA borrowers.
To qualify, borrowers must be current on their existing FHA-insured mortgages, which were endorsed on or before May 31, 2009.
Currently, 3.4 million households with loans endorsed on or before May 31, 2009, pay more than a five percent annual interest rate on their FHA-insured mortgages.
By refinancing, the FHA estimates that the average qualified FHA-insured borrower will save about $3,000 a year, or $250 per month.
“This is one way that FHA can make a real difference to help homeowners who are doing the right thing, paying their bills on time and want to take advantage of today’s low interest rates,” said FHA Commissioner Carol Galante.
FHA said its new discounted prices ‘assume no greater risk” to its insurance fund. The discounts will allow many of these borrowers to refinance into a lower cost FHA-insured mortgage without requiring additional underwriting.
FHA-insured homeowners should contact their existing lender to determine their eligibility. Mortgages backed by the FHA allow borrowers to purchase a home with less of a down payment and less stringent credit requirements than traditional mortgages.
Last month, the FHA announced premium increases for new loans that will contribute more than $1 billion to the agency’s vital insurance fund, based on current volume projections through fiscal year 2013.
The agency will increase its annual mortgage insurance premium by 0.10 percent for loans under $625,500 and by 0.35 percent for loans above that amount. Upfront premiums will also increase by 0.75 percent, which the FHA estimates will cost new borrowers an average of approximately $5 more per month.
These premium hikes will affect new loans insured by FHA beginning in April and June of 2012.
The price cuts for refinancing borrowers apply to all mortgages insured under FHA’s Single Family Mortgage Insurance Programs except: Title I; Home Equity Conversion Mortgages (HECM); Section 247 (Hawaiian Homelands); Section 248 (Indian Reservations); and Section 223(e) (Declining Neighborhoods)
Read the FHA’s Mortgagee Letter on the premium changes.

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