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