In a move to shore up its ailing capital position, the Federal Housing Administration is raising mortgage insurance premiums.
On loans that are less than $625,000, the annual mortgage insurance premium is being increased 0.10 percent, bulletin No. 12-037 Monday from the Department of Housing and Urban Development said.
The 0.10 percent increase is required through the Temporary Payroll Tax Cut Continuation Act of 2011. It goes into effect on case numbers assigned on or after April 1.
On loans that exceed $625,500, the annual premium is being raised by an additional 0.25 percent for a total increase of 0.35 percent. The additional increase on larger loans was accomplished through FHA’s statutory authority. The higher premium impacts jumbo loans with a case number assigned on or after June 1.
In addition, up-front mortgage insurance premiums are being bumped 0.75 percent to 1.75 percent. Loan-to-value ratios and loan terms don’t impact the up-front premium increase. The higher rate will go into effect on loans with case numbers assigned on or after April 1.
FHA estimates that new borrowers will pay an average of an additional $5 per month as a result of the higher up-front premium.
Existing borrowers won’t be impacted by the rate increases.
The increased premiums are expected to help protect FHA’s capital reserve and strengthen the FHA Mutual Mortgage Insurance Fund.
“These modest increases are one of several measures we are taking towards meeting the Congressionally mandated two percent reserve threshold,” Acting FHA Commissioner Carol Galante said in the statement.
Galante added that the move is expected to encourage a return of private capital to the housing market.
“Taken together, these premium changes will enable FHA to increase revenues at a time that is critical to the ongoing stability of its Mutual Mortgage Insurance Fund, contributing more than $1 billion to the Fund, based on current volume projections through Fiscal Year 2013,” the statement said.
