In case you did not hear, the FHA will probably be raising its monthly mortgage insurance "MIP" premiums yet again. "The FHA Emergency Fiscal Solvency Act of 2012" (H.R.4264) has overwhelmingly passed the House and is on its way to the senate. Among other powers, the bill grants the FHA authority to raises its monthly mortgage insurance premiums to as high as 2.05% -- nearly twice the 1.25% rate most FHA-insured homeowners pay today. This would be the highest annual MIP increase in FHA history. For example, on a $400k home with the new monthly MIP of 2.05%, a buyer will pay an extra $267 a month.
Why are the FHA doing this, quite simply they need to shore up dwindling reserves and prevent a bail out! Increasing the monthly mortgage insurance "MIP" premiums is the easiest way to raise money.
*This is a clear signal from the FHA to the housing market that they will be increasing their mortgage insurance premiums "MIP" soon, just as they telegraphed 4 times already in the recent past (see below)
Recent FHA Mortgage Insurance Premium Changes!
The FHA is no stranger to changing MIP rates. Since 2008, the agency has changed its monthly mortgage insurance premiums four times.
In 2008, the FHA charged 0.50% in MIP to home buyers using 30-year fixed rate mortgages and a 3.5% down payment. Since then, those rates have climbed.
In 2009, the FHA charged 0.55 percent
In 2010, the FHA charged 0.90 percent
In 2011, the FHA charged 1.10 percent
In 2012, the FHA charged 1.25 percent (or 1.50 percent in high-cost areas)
If a buyer has been holding off on purchasing a home, now might be a good time to start looking soon before they get stuck with this increase! Of course FHA mortgage interest rates may be dropping, but they're not dropping as fast as FHA mortgage insurance premiums may rise.
You can check out details of the FHA Emergency Fiscal Solvency Act of 2012 here http://www.govtrack.us/congress/votes/112-2012/h562
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Michael Deery
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