FHA Mortgages are Changing...

FHA Will Hike Premiums, Credit Scores and More

December 2, 2009

The Federal Housing Administration is asking for an increase in mortgage insurance premiums to replenish its diminishing capital reserves while hiking credit scores for applicants. Housing secretary Shaun Donovan will ask Congress Wednesday afternoon to raise the 55-basis point cap on annual government MI premiums. Administratively, FHA officials are expected to raise the 1.75% upfront premium and prohibit those points from being rolled into the loan amount. (The agency does not need Congressional approval to raise upfront premiums.) Even though it is hiking loan costs, HUD will allow the upfront premium to be priced into the interest rate. It also will allow home sellers to pay the premium. "The good news is that they are doing this administratively and taking leadership," said Brian Chappelle, a mortgage-banking consultant with Potomac Partners. As the health of the mortgage insurance fund improves, FHA can reduce the premiums and other restrictions, he added.