FHA announced Tuesday it will be lowering its refinance premiums for its Streamline Refinance Program, starting June 11, 2012.
The Obama Administration is taking additional steps to further stimulate the housing market, according to a press release issued by the White House on Tuesday.
The plan is part of President Obama’s overall strategy to support responsible homeowners and the housing recovery. It includes a reduction in fees for FHA borrowers who want to refinance, as well as a requirement for lenders to provide “significant relief” to thousands of service members and veterans.
In a press release issued later the same day, the Department of Housing and Urban Development (HUD) outlined the reductions in refinance premiums FHA will be making to its Streamline Refinance Program [click the link to see the release and FHA’s new mortgagee letter].
Beginning on June 11, 2012, FHA will lower its Upfront Mortgage Insurance Premium (UFMIP) to .01 percent and reduce its annual premium to .55 percent for certain FHA borrowers.
The Obama administration believes this reduction in fees could save FHA-insured borrowers an additional $100 a month, on top of savings resulting from successfully refinancing. Roughly two to three million FHA borrowers are eligible to benefit from the program, though the White House admits “it is always difficult to estimate participation in these programs.”
Acting FHA Commissioner Carol Galante believes these changes will keep more people in their homes. “This is one way that FHA can make a real difference to help homeowners who are doing the right thing, paying their bills on time and want to take advantage of today’s low interest rates. By significantly reducing costs for these borrowers, we can make certain they cut their monthly mortgage burden which will benefit the housing market and the broader economy in the process.”
To qualify for a refinance at a reduced premium, borrowers must be current on their FHA-insured mortgages. Those mortgages must have been endorsed on or before May 31, 2009. According to its new mortgagee letter, FHA will increase upfront premiums on most other loans to 1.75 percent. FHA will also increase annual premiums, but only on mortgages higher than $625,500.
Frank Keating, President and CEO of the American Bankers Association (ABA), applauded the move in a statement released Tuesday:
“The President’s plan to remove cost impediments for borrowers that refinance FHA loans, broadening the accessibility of mortgage relief, is sensible. ABA applauds the inclusion of a streamlined refinance process by removing penalties previously imposed on banks for refinancing FHA loans. This will significantly broaden refinancing during this low rate environment.”
According to the press release, FHA’s new discounted UFMIP prices won’t negatively impact its Mutual Mortgage Insurance (MMI) Fund. The MMI Fund has been under fire in recent years and is widely thought to be going broke, despite FHA’s statements to the contrary.