Tuesday, June 15, 2010

FHA Reform Act - HR 5072

I have to say I'm surprised we haven't heard much talk of the FHA Reform Act recently passed by the House and now on the the Senate. Maybe it's premature to have concerns as much can change in the world of politics but there's a provision in this bill which would bring significant change - restructuring the MI premiums, ranging from .55% - 1.5%.

A financial play for the FHA and HUD? Absolutely! Increased premiums will help HUDs balance sheet which has been hurting. Unfortunately, this update comes at the expense of homeowners and home buyers and therefore the real estate market as a whole.

Increasing MI premiums to possibly 1.5% would increase the monthly payment on a $200,000 loan by $160/month. Talk about effecting purchasing power - this would be comparable to rates increasing from say 5% to 6.25%. This could have far reaching effects for 1st time homebuyers and rate/term refinance opportunities.

With all Washington has done to help solidify the real estate market, they should be very careful with what types of reforms are passed. This reform bill still has a ways to go and specifics will surely change but the framework overwhelming passed through the House and is now on to the Senate. Although we haven't heard much concern from the streets, I'm sure the real estate and mortgage banking lobbyists are working their tails off.

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