The FHA monthly mortgage insurance premium drops January 26 by .50%. This is to make it more competitive with Freddie Mac and Fannie Mae’s 3% down programs. The FHA Up Front Mortgage Insurance Premium will still be 1.75%.
The better quality borrowers have migrated to conventional financing because the cost of FHA financing has been very expensive. FHA insurance has had several premium increases over the past few years.
The buyer’s that can’t qualify for conventional financing have been pushed to use FHA. The government made the FHA insurance premiums higher to increase their reserves to meet government requirements. The FHA reserves have dropped because of defaulting loans draining the reserves during the 2007-20012 period. The unintended consequence of making the cost of the loan higher to “A” level buyers, is it’s making the FHA loan portfolio more at risk to loans defaulting, as only lower quality borrowers are using FHA.
Also on January 26 the new “Collateral Underwriter” appraisal review system will be active. The CU will potentially add loan underwriting time, and appraisal costs. The Fannie Mae CU system will rank the subject loan’s appraisal comparables to up to 20 additional comps in the Fannie Mae system. If the appraisal’s comps are rated as higher risk than other comps, the appraiser will have to justify why the other comps are not being used to determine property valuation. Unfortunately the computer generated comps will be not necessarily be using “neighborhood” comps, as they’ll be using census zones. The appraiser and AMC (appraisal management company) will not have direct access to the CU comps, except through the underwriter.
If you are in the Los Angeles area, have any questions or real estate sales or financing needs, feel free in contacting me.
Ron Henderson GRI, RECS, CIAS
Multi Real Estate Services, Inc.
Gov’t Affairs Chair – California Association of Mortgage Professionals
Specialist in the Art of Real Estate Sales and Finance
Real Estate market, mortgage rates, Los Angeles, San Fernando Valley, Conejo Valley, Simi Valley, Woodland Hills, West Hills, Calabasas, Chatsworth