The Obama administration in yet another move to stall our housing economy (they say save all indicators and historical data points to stall) has decided that the annual mortgage insurance premium on FHA loans should be raised again.  Yes, again.  This was part of their FY 2013 budget they just sent to Congress. 
A brief history of Mortgage insurance: It was raised from .55% to 1.15% last year which horrified lenders and borrowers.  Not paying any attention to the negative circumstances they created and increased borrower hurdles they created they are increasing it again.  Apparently, the Obama administration needs a reminder lesson on cause and effect.

The New Increases:
1.25% annual premium for loans under $625,500
1.5% annual premium for loans over $625,500
Example of why this is horrible: On a $700,000 loan that is an extra $204 per month, making the monthly mortgage insurance $875 per month.  That is a very nice car payment except there is no car and it does not go towards anything tangible for the borrower. 

Why: They claim that FHA's delinquencies are increasing, which they are.  But they are not on loans originated in the past few years but rather loans originated when FHA had very loose credit score requirements and allowed the borrower to do 100% financing through down payment assistance programs. AKA 4+ years ago.  Also they are not on the higher end loans yet that is who is being hit the hardest.  Seems fair?
When: The changes are expected to occur in mid April.


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