FHA Premiums Reduced

By James Woodard

January 23, 2017 5 min read

Good news for FHA bowers. Their required premiums have been lowered.

Mortgage insurance premiums on FHA-backed loans will be lower by 25 basis points on loans endorsed starting January 27, by the federal government, according to a report from the National Association of Realtors.

"After four straight years of growth and with sufficient reserves on hand to meet future claims, it's time for FHA to pass along some modest savings to working families," Julian Castro, secretary of the U.S. Department of Housing and Urban Development, announced today.

The report includes the general response for real estate leaders as expressed by the NAR president.

"NAR President Bill Brown praised the move. Dropping mortgage insurance premiums will mean a lot more responsible borrowers are eligible to purchase a home through FHA," he said. "That puts more money in the fund to protect taxpayers, and it puts more families in homes so they can live out the American dream."

"The new premium schedule, which takes effect for residential mortgage loans that have an insurance endorsement date on or after January 27, is expected to save the average home buyer $500 a year in insurance costs."

The report also pointed out the rationale of HUD in reducing the premiums.

"In its announcement, HUD said the reduced premiums reflect the healthy state of HUD's mutual mortgage insurance fund, which is the agency's principle fund for insuring FHA mortgages.

"We've carefully weighed the risks associated with lower premiums with our historic mission to provide safe and sustainable mortgage financing to responsible homebuyers," said Edward Golding, HUD principal deputy assistant secretary for housing.

"This conservative reduction in our premium rates is an appropriate measure to support [home buyers] on their path to the American dream."

"Under the new schedule, a home purchase with a base loan amount of up to $625,000, with an 85-percent loan-to-value ratio and a 30-year loan term, will require an annual mortgage insurance premium of 55 basis points, down from 80 basis points.

"A 15-year loan of that same amount and with a 90-percent LTV ratio will require an MIP of 25 basis points, down from 45."

Q: Are mortgage applications increasing?

A: At latest report applications are rising. Mortgage applications increased 5.8 percent from one week earlier, according to data from the Mortgage Bankers Association.

"The most recent week's results include an adjustment to account for the New Year's Day holiday, while the previous week's results were adjusted for the holiday."

Q: How are returns on REIT investments shaping up?

A: The total return of the U.S. Equity REIT market fell short of the S&P 500's gain in 2016, while Mortgage REITs nearly doubled the total return of the broader equity market, the National Association of Real Estate Investment Trusts reported.

"The FTSE NAREIT All Equity REITs Index had an 8.63 percent total return and the FTSE NAREIT All REITs Index, the broadest index of the U.S. REIT market including both Equity and Mortgage REITs, was up 9.28 percent for 2016, compared with the S&P 500's 11.96 percent total return for the year."

Q: What are predictions for commercial mortgages this year?

A: Commercial and multifamily mortgage lending is expected to increase in 2017, as lenders' appetites to place new loans and borrowers' appetites to borrow both remain strong, according to a new Mortgage Bankers Association survey.

"Nearly two-thirds (63 percent) of the top firms expect originations to increase in 2017, with one-quarter (26 percent) expecting an increase of 5 percent or more. A full half (50 percent) expect their own firm's originations to increase by 5 percent or more," it was noted in a recent report.

"Commercial mortgage bankers expect 2017 to carry-over much of the momentum from 2016," said Jamie Woodwell, MBA's Vice President for Commercial Real Estate Research.

To find out more about Jim Woodard and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com. Jim Woodard's email: [email protected] COPYRIGHT 2017 CREATORS.COM.

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