FHA Postpones Premium Changes until October
Last week, Federal Housing Administration (FHA) commissioner David Stevens announced plans for implementing FHA's new mortgage insurance premium structure. Based on industry feedback to the announcement, the FHA postponed the premium fee changes on all new case numbers for one month, and will now implement them on Oct. 4, 2010. "Over this past week, the industry responded with support of the new fee structure, but voiced strong concern about having system changes ready in time to meet the original Sept. 7, 2010 deadline," said US Housing and Urban Development (HUD) deputy assistant secretary Vicki Bott. "Since these system changes impact regulatory disclosures, lenders expressed they must have the additional time to implement and test systems. FHA took this feedback seriously and has accommodated the need for additional time." FHA will lower its upfront premium simultaneously with the increase to the annual premium. FHA's upfront mortgage insurance premium will be adjusted down to 100bps on all amortization terms and the annual mortgage insurance premium will increase to 85-90 bps on amortization terms greater than 15 years. The Senate last week approved its version of HR 5981, which allows the FHA it to hike its annual premiums for its single-family program. It allows the FHA to raise its annual mortgage insurance, raising the statutory cap rate to 1.55% from 0.55% — a flexibility that the industry and the FHA says could ultimately reduce the cost of credit insured by the FHA. Write to Diana Golobay.