January 26, 2015: Changes Ahead for Mortgage Financing

January 26, 2015:  
Changes Ahead for Mortgage Financing     


     Both FHA and Fannie Mae (Conventional Loans) have recently announced upcoming changes that will kick-in on January 26, 2015 ...  


     FHA has announced a 50 Basis Point reduction in Monthly Mortgage Insurance costs to Borrowers, resulting in most cases, a half-percent cut on MI charges.  

     An example of cost reduction realized:  

     A $200,000 Loan reaps an $83.33 per month savings.  That reduced Mortgage Insurance payment savings gives a Borrower MORE buying power, perhaps as much as $17,000 in price and/or loan approval.  

     It also means the Borrower realizes a reduction in their Debt-to-Income (DTI) Ratio of 1.56 Per cent at a given income amount ... of say $5,316 monthly.  Any one of these factors can be a "deal breaker, maker, or saver" moving forward in their transaction.  Estimates have been made that some 250,000 new Borrowers will be helped by these cost reductions over the next 3 years.

     HUD states that their Bottom Line in their Fund would not see significant reductions with this action.  Until recently their Fund was deeply in the "red".  That deficiency had resulted in their recent increases in their Mortgage Insurance charges.  

     Apparently, HUD's losses have decreased in recent months, as loans continue to be paid back at a higher percentage of on-time payments, coupled with a slowing Foreclosure rate.  All of these things hopefully mean good news for First-Time Homebuyers ... and especially those with Credit Scores below 680.

     Perhaps these changes come as a result of FHA losing some 30% of Market Share in recent months/quarters (while utilizing the higher cost Mortgage Insurance).  Or perhaps some competition proved inspirational.

     Fannie Mae's announcement bringing back their 3% Down Payment Program may have motivated FHA to act. Fannie Mae's 3% Program offers Interest Rates and Mortgage Insurance premiums that are VERY competitive to FHA's.

     No matter the reasoning, I'm hoping that these changes (especially as we head into the historically busier Spring sales season) will jumpstart our struggling housing market. And we'll experience a quicker, more sustained economic recovery as a result. 

     Fannie Mae's change, also coming on January 26th, is far less reaching, so I'm assuming that it will gain very little press coverage.  Be watching for my post on that change shortly ...



     
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1 comment:

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