White House Announces Mortgage Insurance Decreases for FHA Streamlines

President Obama today announced changes in fees charged tornFHA-insured borrowers who wish to refinance into another FHA-insured mortgagernas well as significant compensation to servicepersons and veterans who may havernsuffered financial harm due to mistakes by lenders.  </p

Borrowers with FHA-backed mortgagesrnwho use FHA’s streamlined refinancing program are currently charged an up-frontrnmortgage insurance premium of 1 percent of the outstanding loan balance and anrnadditional 1.15 percent as an annual premium. rnFHA is reducing the upfront premium to .01 percent for streamlinedrnrefinancing of loans originated before June 1, 2009 and cutting the annual feernto .55 percent.  These reductions willrnsave the typical borrower about $1,000 per year before any savings from reducedrninterest.</p

The fee reduction will be coupledrnwith a previously announced initiative to “remove the reticence that many lenders have had tornprovide refinancing to additional families.” rnFHA uses a formula called the “Compare Ratio” to assess lender performance.  A lender’s ability to do business with the FHArnis dependent on this ratio and up to now streamlined refinances have been partrnof the calculation.  Because many of thernloans refinanced have been of the vintage that has had such a high default raternlenders have been reluctant to offer new loans out of concern over an impact onrntheir ratio.  FHA will now remove thosernloans from the calculation, hopefully reassuring lenders and opening up thernprogram to more borrowers.</p

The assistancernto servicemembers is slightly different than what was reported earlier.  The White House said the settlement arrangedrnwith lenders is “on top of” the $25 billion settlement announced last monthrnwith five lenders, federal agencies, and 49 of the state attorneysrngeneral.   Under the new agreement thernlenders will conduct a review of every foreclosure of a servicemembers homernsince 2006 to check for violations of the Servicemembers Civil Relief Actrn(SCRA).  Any who were wrongly foreclosedrnwill receive compensation equal to the larger of the equity they lost plusrninterest and $116,785 or an amount provided for thernsame violation through a review conducted by the banking regulators. There will also be refunds for servicemembersrnwho were wrongly denied the opportunity to refinance to lower interest ratesrnand relief for servicemembers who had to sell their homes for less than thernmortgage balance due to a Permanent Change in Station.  </p

Going forward the lenders willrnextend certain foreclosure protections afforded under SCRA to those serving inrnharm’s way regardless of when that mortgage was obtained (it previously appliedrnonly to mortgages obtained prior to active duty) provided that the servicememberrnwas receiving Hostile Fire/Imminent Danger Pay and was stationed away from homernwithin nine months of the foreclosure. rnThe lenders will also pay $10 million dollars into the Veterans Affairsrnfund that guarantees loans on favorable terms for veterans.</p

Although The President was clear to note “we don’t need congress to do this,” he reiterated his commitment to expand refinance offerings beyond today’s announcement:</p

“Congress should give every homeowner the possibility to refinance theirrn home at historically low rates.”  If Congress refuses, I’ll continue torn do everything in my power to act without them.”

All Content Copyright © 2003 – 2009 Brown House Media, Inc. All Rights Reserved.nReproduction in any form without permission of MortgageNewsDaily.com is prohibited.