FHA Increases Fees to Save Programs?

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It’s no secret that the housing crisis has strained Fannie Mae, Freddie Mac and the Department of HUD.  So, congress just passed H.R. 5981.  This bill gives FHA the authority to adjust its mortgage insurance rates to increase funding to the FHA Mutual Mortgage Insurance Fund.  This move will immediately begin to yield $300 million per MONTH to the fund.  The current increase is not set in stone, and if the powers that be at FHA decide they need a little more cash, they can simply raise the fees some more.   My guess is within the next 6 months, the rates will indeed be increased.

After September 7th, 2010 all new FHA loans will incur substantially higher mortgage insurance (MI) fees.  If maxed out the increase to the consumer could be upwards of 10% on your monthly payments!  This is, in fact, a TAX on those who are looking at purchasing their first home.  These are the very people we need to encourage getting in the market, not dissuade them from doing so.

I’ve attached a link to a document released by Mr. David H. Stevens, Assistant Secretary for Housing / Federal Housing Commissioner as to HUD’s announcement.

HUD_August_Special Edition_080510

Additionally, I’ve linked to a great video about the effect of these changes that really explains the program.  http://www.thinkbigworksmall.com/mypage/archive/1/52542/

Bottom line, if you’re thinking of buying a home, and will be using FHA as a financing option, you need to act now, before the costs rise!

Feel free to tell me what you think with a comment below!