HUD Announces New FHA Premium Pricing Structure

Beginning July 14, 2008, FHA will implement a new flexible premium pricing structure that HUD believes will assist more homeowners struggling to keep up with their high-cost subprime adjustable rate mortgages. According to HUD Deputy Secretary Roy A. Bernardi, “fair pricing will allow FHA to reach more troubled homeowners without placing excessive risk on its insurance fund.”

Up to now, FHA had one premium structure that charged borrowers 1.50 percent of the loan balance upfront and .50 percent annually regardless of the borrower’s credit standing. Under the new pricing structure, FHA’s upfront mortgage insurance premium will range from 1.25 percent to 2.25 percent based on borrower credit risk.

The new pricing plan is set to coincide with modifications to extend the benefits of the FHA Secure program to more homeowners affected by the volatility in the mortgage market. The idea is to help homeowners who have missed up to three monthly mortgage payments over the past 12 months and may be facing foreclosure. Eligible borrowers will be able to refinance their subprime loans through FHA with slightly higher mortgage insurance premiums but at substantially lower interest rates. The end result should be a lowering of their overall mortgage costs.

In addition, HUD believes the new premium structure will preserve lower premium costs for FHA’s traditional borrowers, including low-income families who have a strong credit history and a down payment. “Charging borrowers a fair premium based on their credit risk means that they pay their own way," says Assistant Secretary for Housing-Federal Housing Commissioner Brian D. Montgomery. The hope is the move will also help to keep FHA more financially sound and allow the agency to continue to serve the public's needs without having to be supported through the use of taxpayers’ dollars.

Metro Mortgage Company is a federally regulated Mortgage Banker specializing in Conventional, Jumbo and FHA/VA mortgage loans throughout Florida. Call us today at 888-617-3674.

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