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FHA Gets OK to Raise Annual Mortgage Insurance Premium
The House of Representatives has just approved by a 406-4rnvote the Federal Housing Administration Reform Act, a law designed to shore uprnthe finances of the agency which now guarantees nearly one-third of thernnation's mortgages. </p
The new law givesrnFHA the authority it had requested to raise the ceiling on the annual premiumsrnit charges borrowers for its guarantee, raises the limits on multifamily housing in certain high cost communities and inrnelevator buildings, and authorizes some previously announced provisions to increase enforcement of FHA lenders.</p
Earlier this year FHArn announced it intended to raise itsrnpremiums in a two-step process that was part of a larger programrn to put itselfrnback on a firm financial footing. Thernfirst step, raising the up-front premiums due from the borrower at loan closingrnwas already possible under existing authority. Effective April 9, 2010 those upfront premiums went from 1.75 percent to 2.25 percent. However, the FHA was not able to raise thernannual premium without the permission of Congress as it was already at the authorizedrnceiling. Under the law passed today thernagency will be allowed to increase its annual premium to 1.50 percent of thernunpaid balance of the loan. This shift will allow for the capital reserves to increase with less impact to the consumer because the annual MIP is paid over the life of the loan instead of at the time of closing.</p
Here are the previously announced provisions to increase enforcement of FHA lenders:</p<ul
</li</ul
HUD Secretary Shaun Donovan said, “The FHA is playing a vital role in the current housing market. We must remain mindful that qualified, responsible families need continued access to affordable homeownership options. The changes that we are implementing coupled with this bill will ensure that FHA can continue to serve as a bridge to economic recovery and that mortgage financing remains available until private capital returns.”</p
The Mortgage Bankers Association (MBA) was also quick to fire offrnan endorsement of the House actions. rnRobert E. Story, Jr., Chairman of MBA said “The reforms containedrnin this bill will help stabilize FHA's finances by allowing the agency to raisernits annual premiums and better take corrective actions against lenders who arernputting the program at risk.”</p
The bill must still gain passage in the Senate.</p
HERE is the CBO Estimate of Cost</p
HERE is the most recent bill summary provided by the CONGRESSIONAL RESEARCH SERVICE
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