FHA Announces an Increase to the Annual Mortgage Insurance Premium

In August 2010, President Obama signed a bill allowing HUD to charge an annual .85% of Annual Mortgage Insurance Premium for loans with a down payment equal to or greater than 5%.  For loans with a down payment of less than 5% is charged an Annual Mortgage Insurance Premium of .90%.  The rates are applied for loan term of 15 years or more. The Mortgage Insurance rates applied before President Obama signed the bill was at .50% and .55% respectively for loans payable in 15 years or more.   And just after a few short months, an increase in Annual Mortgage Insurance Premium will take effect again.

Effective April 18th, 2011, the FHA annual mortgage insurance premiums will increase by one-quarter percent.   While the Upfront Mortgage Insurance remains at 1%.  Mortgage Insurance is a policy that protects lenders against losses that result from defaults on home mortgages. FHA requirements include mortgage insurance primarily for borrowers making a down payment of less than 20 percent.

Under the new term, borrowers will pay 1.15% of the mortgage amount instead of .90% as they have paid recently for 30 year loans with the standard minimum 3.5% down payment.  FHA Commissioner David Stevens explained that “After careful consideration and analysis, we determined it was necessary to increase the annual mortgage insurance premium at this time in order to bolster the FHA's capital reserves and help private capital return to the housing market.”  He added, “This quarter point increase in the annual MIP is a responsible step towards meeting the Congressionally mandated two percent reserve threshold, while allowing FHA to remain the most cost effective mortgage insurance option for borrowers with lower incomes and lower down payments." 

The comparison of the old and new Mortgage Insurance Premiums is illustrated below:

Mortgage Insurance Premiums
Loans > 15 years
UFMIP = 100bps	Annual Premium
LTV (Loan-To-Value)	Through 4/17/2011*	On/After 4/18/2011**
≤ 95.00 percent	85 bps	110 bps
> 95.00 percent	90 bps	115 bps
Loans ≤ 15 years
UFMIP = 100bps	Annual Premium
LTV (Loan-To-Value)	Through 4/17/2011*	On/After 4/18/2011**
≤ 90.00 percent	None	25bps
> 90.00 percent	25 bps	50 bps
* For case numbers assigned on/before April 17, 2011 ** For case numbers assigned on/after April 18, 2011
Table 1: Mortgage Insurance Premiums (Source: HUD Mortgagee Letter 11-10)

Example of Annual Mortgage Insurance Premium Increase 30-year Term
Average Loan	>95.0 percent LTV
	October 2010 90 bps	April 2011 115 bps
Sale Price	$163,000	$163,000
Minimum Down payment (3.5%)	$5,705	$5,705
Mortgage Amount without UFMIP	$157,295	$157,295
FHA Annual MIP (monthly payment)	$118	$151
Change in payment (monthly)		$33
Table 2: Sample Computation of Monthly MIP (Source: HUD Mortgagee Letter 11-10)

Below are some various examples using various loan amounts to illustrate how much the increase is going to effect the monthly Mortgage Insurance payment. 

$100k base loan amount       

  .90 monthly MI= $75.00

1.15 monthly MI=$95.83

$150K base loan amount

   .90 monthly MI=$112.50

1.15 monthly MI=$143.75

$200K base loan amount

  .90 monthly MI=$150.00

1.15 monthly MI=$191.67

$250k base loan amount

 .90 monthly MI= $187.50

1.15 monthly MI= $239.58

$300k base loan amount

   .90 monthly MI=$225.00

1.15 monthly MI= $287.50

$350k base loan amount

   .90 monthly MI=$262.50

1.15 monthly MI=$335.42

$400k base loan amount

  .90 monthly MI=$300.00

1.15 monthly MI=$383.33  

The insurance payment may be cancelled if the borrower has completed the payment of 20% of the total property amount.

The April 2011 mortgage insurance premium change will not affect the homeowners who already have FHA loans.

Starting April 18^th, the increase can have a substantial impact on the monthly mortgage insurance. It will be more expensive for you to buy or refinance a home using FHA loans as a result of this change. Therefore, if you are looking for a home, it is better to get into contract before April 18, 2011 to save the .25% of loan amount every year (for at least five years).

If you need full details on Mortgage Insurance Premium new law, you may contact your loan officer.

Things To Do Before Moving (Part 2 of 3)

2-3 Weeks Before the Move

- Pack like items together. Clothes go in one box. Kitchen things in another. Make sure to label each box on multiple sides to avoid confusion later on. You may also label them according to its new destination i.e. garage, kitchen, master bedroom.

- Contact or visit local post office to obtain Change of Address form. The form is also available online at www.usps.com.

- Make sure to inform the following people and businesses of your new address:

   1. Friends and family
   2. Banks
   3. Insurance companies
   4. Credit card companies
   5. Doctors, dentists and any other service providers
   6. Clubs or Associations
   7. Magazine and Newspaper subscriptions

- Contact all utility providers (electricity, telephone, gas, electric, cable TV, internet connection etc.) in your new and old of your moving date to make arrangements for connection and disconnection.

- Complete all banking arrangements in old and new location to transfer any funds to your new bank if necessary.

- If you are transferring to another state - Check requirements for new drivers license and auto registration in your destination state.

Things To Do Before Moving (Part 1 of 3)

Relocation can be a real headache. It takes up so much of your time and it's a very tedious process. But with a little planning and organization, you can make it a smooth process.  Here are some tips that will make your moving day like a walk in the park:


4-6 Weeks Before Moving ....

- Decide which items you wish to transport to your new home and what items you want to dispose of. You may either donate them to a charity or organize having a garage sale. Contact a local charity or pick a date at least two weeks before moving date for the garage sale. During this time, you may advertise the garage sale in your neighborhood.

- Make sure to shop around for the best movers. Ask your relatives, friends, neighbors and coworkers for recommendations or who to avoid.

- Start accummulating packing supplies. Make sure that the boxes you purchase are specially designed for moving to prevent any damages to your belongings.

- Make all necessary travel arrangements (hotels, flights, car rental, etc.). Making the reservations ahead of time will make sure that your preferred flight and hotel are still available.  Early booking can also save you a lot of money. Remember, moving can get very expensive, it is best to save whatever you can.

- Finalize all real estate and rental needs.

- If you have children, notify the schools in the old and new location and arrange for the transfer of school records and begin the process of registering in new schools.

- Many moving expenses are tax deductible. Obtain necessary formS in IRS. Form 3903 is the form to fill out for deducting your moving expenses from your taxable income. You will also need to fill out Form 8822 or IRS Change of Address Form. You may either go to IRS office or visit IRS website at www.irs.gov to download and print the form.

- Make arrangements with sitters or daycares for pets and children. It is easy for the children and pets to get hurt or lost on moving day. It's going to be easier for you to concentrate on the task of moving your stuff when you don't have to mind other things.

The Obama Administration Mortgage Market Overhaul Proposal

The Obama administration released its proposal for overhauling the US mortgage market that would limit the government's role in supporting home ownership. The Plan? Slow death for mortgage giants Fannie Mae and Freddie Mac while winding down the government's role in housing finance.

The administration proposed 3 recommendations to the Congress. The Congress will shape the final policy.

The 3 recommendations are:

- No government role, except for existing agencies like the Federal Housing Administration.or FHA.

• A government guarantee of private mortgages triggered only when the market is in trouble.

• Government insurance for a targeted range of mortgage investments that already are guaranteed by private insurers. The government guarantee would kick in only if those private companies couldn't pay.

In September 2008, Fannie and Freddie were seized by regulators as the financial crisis intensified. The Bush administration has instructed a bailout policy for the mortgage giants to help lower the cost, increase the availability of home mortgage financing and to cover the losses on bad home loans. The rescue has cost the taxpayers nearly $150 Billion, making them the most expensive bailout in the US history.  The Republicans said that it is necessary for Fannie and Freddie to be abolished because they were responsible for the collapse of the housing market.

Today, 90% of the outstanding residential mortgages are controlled by the Federal Housing Administration (FHA), the Department of Veterans Affairs, or Fannie Mae and Freddie Mac, which means that the mortgages are backed by the taxpayers.  In a private system, the US taxpayers don't have to guarantee the liabilities - this will be the responsibility of the investors.

Once the proposal is put into action, the privatization would probably end the popular 30-year fixed rate mortgage that the new home buyers are currently enjoying. Or, if it's not completely abolished, it will be more expensive than the current 30-year fixed rate of 5%. Higher mortgage rates could make homes less affordable for buyers.

For more information on Mortgage Market Overhaul Proposal,  please visit http://www.usatoday.com/money/economy/housing/2011-02-11-fannie-freddie-mortgage-overhaul_N.htm

Energy Efficient Homes

Electricity is an essential part of our modern daily lives. In our homes, we use it for lighting, running appliances and electronics and for heating and cooling.

With home buyers getting more and more interested in preserving the environment, energy efficiency is widely becoming a conscious practice for them. The energy used in homes often comes from burning of fossil fuels at power plants, which contributes to global warming. So, the less energy used, the less air pollution generated.  Energy efficient homes are marked by a blue ENERGY STAR. These homes are not only eco-friendly, but they also have lower electricity bills.

Any home with three stories or less (i.e. single-family home, low-rise multi-family homes, log homes, etc.) can earn the ENERGY STAR label if it has been verified to meet Environmental Protection Agency or EPA's guidelines. For a home to qualify for the Energy Star, it must be 20-30% more efficient than standard homes.

Having Properly Installed Insulation, High Performance Windows, Tight Construction and Ducts and Efficient Heating and Cooling Equipment results to even temperature throughout the house, reduced energy use and increased comfort.

Homes may also earn the Energy Star if they have Energy Star qualified products such as refrigerators, washing machines, dishwashers, lighting fixtures and others.

With energy efficient homes, the homeowner can save from $200-$400 in annual savings on utility bills.

Did you know that in Alaska alone, there are already 11,467 ENERGY STAR qualified homes built up to date? And the ENERGY STAR qualified homes built in 2010 are equivalent to eliminating emissions from 9 vehicles; saving 53,352 pounds of coal; planting 15 acres of trees; and saving the environment 104,634 pounds of Carbon Dioxide. (Information taken from www.energystar.gov)

The improved comfort, lower utility bills and improved durability can translate into higher resale value as compared to less energy efficient homes.  More often than not, energy efficient homes can be found in the newly constructed houses. Furthermore, newly built homes offer home warranties. Consequently, it is more beneficial for the home buyers to consider looking at newly developed properties.

For more details on how to make your home more energy efficient, please visit http://www.energystar.gov/.  If you want to save the environment with having low electricity bills, you may want to consider checking out http://hearthstonealaska.com/.

"ANTI-FLIPPING WAIVER" IS EXTENDED FOR ANOTHER YEAR

Federal Housing Administration (FHA) Commissioner David H. Stevens has extended FHA's temporary waiver of the "Anti-Flipping Rule" to help stabilize the current housing market.

In 2003, the Department of Housing and Urban Development (HUD) issued a rule that prohibited FHA from insuring a mortgage on homes that were owned by the seller for less than 90 days. This was issued to protect the consumers from a real estate predatory lending practice called "flipping" on mortgages insured by the FHA. Property "flipping" occurs when a property is resold for a sizeable profit at a falsely inflated price shortly after being purchased by the seller.

In February 2010, FHA lifted the ban for 1 year to attract buyers on foreclosed properties. FHA will be extending the waiver for another year, until January 2012. The waiver will allow homes to resell as quickly as possible.

However, the following requirements must be met before pushing through with the transaction:

1. All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.

2. In cases in which the sale price of the property is 20 percent or more above the seller's acquisition cost, the waiver will only apply if the lender meets controlled conditions.

3. The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for Purchase program.

For more information on the Anti-Flipping Rule Waiver, please check out http://portal.hud.gov/hudportal/HUD?src=/press/press_releases_media_advisories/2011/HUDNo.11-007.