San Francisco Chronicle
On Tuesday, the Federal Housing Administration announced it will slash mortgage insurance premiums for certain homeowners who refinance an FHA loan into a new one under its streamlined program.
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As part of ongoing efforts to encourage the return of private capital in the residential mortgage market and strengthen the Federal Housing Administration’s (FHA) Mutual Mortgage Insurance Fund, Acting FHA Commissioner Carol Galante recently announced a new premium structure for FHA-insured single family mortgage loans. FHA will increase its annual mortgage insurance premium (MIP) by 0.10 percent for loans under $625,500 and by 0.35 percent for loans above that amount. Upfront premiums (UFMIP) will also increase by 0.75 percent.
These premium changes will impact new loans insured by FHA beginning in April and June of 2012. Details will soon be published in a Mortgagee Letter to FHA-approved lenders.
The Temporary Payroll Tax Cut Continuation Act of 2011 requires FHA to increase the annual MIP it collects by 0.10 percent. This change is effective for case numbers assigned on or after April 1, 2012. FHA is also exercising its statutory authority to add an additional 0.25 percent to mortgages exceeding $625,500. This change is effective for case numbers assigned on or after June 1, 2012.
The UFMIP will be increased from 1 percent to 1.75 percent of the base loan amount. This increase applies regardless of the amortization term or LTV ratio. FHA will continue to permit financing of this charge into the mortgage. This change is effective for case numbers assigned on or after April 1, 2012.
WASHINGTON (AP) — The Federal Reserve Bank of New York has turned down an offer by American International Group to repurchase dodgy mortgage bonds that the Fed had taken off the insurance company’s hands during the financial crisis.
AIG had offered $15.7 billion for the bonds. The Fed thinks it can do better by having companies competitively bid on the mortgage bonds over time.
The economy and financial conditions have improved since the crisis. The Fed says there is a “high level” of interest in the bonds by investors.
The government had bailed out AIG in 2008, extending lifelines worth $182 billion. At the time, the Fed also took over a portfolio of soured mortgage bonds that AIG had held. The company is repaying the government by selling some of its businesses.
American International Group Inc., based in New York, said the Fed’s decision could hurt taxpayers.
“We are highly disappointed in the Fed’s decision, which may prevent AIG from delivering on its goal that U.S. taxpayers earn a profit on their investment in AIG,” a statement issued by the company said. “That the Fed, which has been such a constructive partner over the last two years, would hurt the very company in which U.S. taxpayers own a 92% stake is very difficult to understand.”
The Federal Housing Administration (FHA) has released guidance to homeowners and lenders that use the reverse mortgage or Home Equity Conversion Mortgage (HECM) program and are dealing with outstanding property taxes and unpaid hazard insurance premiums. FHA’s guidance is intended to assist elderly borrowers who have neglected to pay these expenses and may face foreclosure.
HUD regulations allow lenders to make tax and insurance payments on behalf of their elderly clients from the borrower’s available mortgage funds. However, once those resources are exhausted, the lender must advance funds to protect FHA’s interest and obtain reimbursement from the borrower.
Over time, however, these unpaid debts and lender advances have resulted in an untenable situation that could put the FHA Insurance Fund at risk and result in foreclosure proceedings against delinquent seniors. While the guidance issued today is intended to help elderly homeowners avoid foreclosure, lenders may have no choice if these defaults are not cured.
FHA’s Mortgagee Letter applies to all HECM loans where the lender/servicer advanced corporate funds to satisfy an unpaid property charge on behalf of the borrower. It reminds lenders that foreclosure is to be a last resort when dealing with their elderly clients. It also includes sample letters that lenders may use to make certain borrowers understand that property tax and hazard insurance are required expenses that must be paid even though the homeowner owes nothing on their mortgage loan.
The Federal Housing Administration (FHA) released its annual report to Congress last week on the financial status of its Mutual Mortgage Insurance (MMI) Fund — FHA’s principal insurance account that includes all single-family and reverse mortgage activity. FHA’s study finds that since last year, the capital reserve ratio held steady, insurance claims declined significantly, and the economic value of FHA’s single-family insurance program grew by more than $1 billion, from $3.6 billion in 2009 to $4.7 billion in 2010.
Like last year’s report to Congress, the report shows that FHA is sustaining significant losses from loans insured prior to 2009 and its capital reserve ratio remains below the congressionally mandated threshold of two percent of all insurance-in-force. However, the report concludes that under conservative assumptions of future growth of home prices, and without any new policy actions, FHA’s capital ratio is expected to approach two percent in 2014 and exceed the statutory requirement in 2015.
Over this past year, FHA:
