FHA Raising Upfront MIP April 5th

Shoring up loan losses seems to be the reason for this latest change, more may be coming this summer.

Michigan, Mortgage, Expert, Birmingham, Bloomfield, Detroit, Rochester, Royal Oak, Troy

The Department of Housing Urban Development (HUD) is moving forward with its plans to stem the losses in its Federal Housing Administration (FHA) program.

With concerns in Congress that HUD may need its own bailout, steps are being taken to generate more revenue to absorb the higher losses on foreclosures.

Starting April 5, 2010 all case numbers pulled for new loans will require an upfront MIP factor of 2.25%.  Currently the factor is 1.75%, which was recently increased from 1.5%.

The 2.25% is what FHA's upfront MIP factor was in the 1990's before the Clinton administration had it reduced as HUD's MIP insurance pool was flush with cash.

Also of note, the monthly MIP factor was recently increased from a 0.5% to 0.55% base.

What's this mean for homebuyers?

If you're getting a $100,000 loan, the upfront MIP changes mean an increase of $500 and the monthly change is an increase of $4.17/month. 

It's important to remember the upfront MIP is usually financed into the loan amount, so the monthly effect of the $500 increase in the above example will depend on the borrower's interest rate. 

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In addition to real estate lending, consulting and investing, Drew Sygit writes & speaks about the mortgage & real estate industries.  He holds mortgage industry designations CMPS, CMC, CRMS, CMLO, CALO, has an MBA and is an approved industry instructor.  He's presented, spoken and/or written for HUD, Financial Planning Association, Financial Planners Association of Michigan, Michigan Association of CPA's, Institute of Continuing Legal Education, Oakland Real Estate Investors Association, North Oakland County Board of Realtors and numerous industry publications.  For speaking engagements and questions he can be reached at dsygit@TheLendingEdge.com.  He also publishes his own blog:  http://DrewsMortgageNews.com & has a FaceBook FanPage: www.FaceBook.com/TheLendingEdge.