HUD (Housing and Urban Development) announced recently a number of changes for FHA (Federal Housing Administration) Insured Home Loans that will be taking place in the next few months, the first April 1.
The first change is an increase in the cost of yearly mortgage insurance for FHA insured home loans. Although a fairly small increase compared to the last one, it will still have a significant effect on low to moderate income borrowers.
Ellie Mae, a leading provider of loan software for the mortgage industry, has already noted a decrease in FHA mortgage activity, even before the changes take place. The percentage of FHA loans has dropped six percent of the total loans during the last six months according to their sampling.
I actually think this number is probably higher than actual due to the number of FHA Streamline refinances that are in this mix. Of interest is the reasoning behind this and additional increases. FHA is looking at several shortfalls due to foreclosures and short sales and the increase was supposed to increase the statutory reserves for FHA. With fewer loans being made, this seems to be self defeating.
The other changes happening can be seen in my previous article.
About the author: Fred Chamberlin is a senior loan officer with Guild Mortgage Company in Oak Harbor. He has been in the mortgage origination business for over 20 years and in the lending business for over 30 and authors a number of mortgage related blogs.