FHA Premiums Set To Rise

The Mortgage Bankers Association (MBA) has lauded Senate passage of H.R.5872, a bill to increase the Federal Housing Administration's (FHA) multifamily commitment authority, and H.R.5981, which would allow the FHA to increase its annual premiums for its single-family program. Both bills will now go to President Obama for his signature.

H.R.5872, which passed the House of Representatives last week, increases the FHA's commitment authority for its multifamily insurance programs by $5 billion for the remainder of the fiscal year. Without this increase, FHA would have exhausted its current authority sometime in mid-August and would have been forced to stop issuing any commitments to insure the loans in their current pipeline of applications until the next fiscal year, which begins Oct. 1.

"FHA's multifamily programs have been a critical source of funding to build and renovate multifamily and rental housing during the recent credit crunch," says Robert E. Story Jr., chairman of the MBA.

The other bill, H.R.5891, will permit the FHA to increase its annual premiums, raising the statutory cap on forward loans from 0.55% to 1.55% and the cap on reverse mortgages from 0.5% to 1.25%. The legislation is nearly identical to one of the key provisions of the broader FHA Reform Act, which passed the House in June but has yet to be considered by the Senate.Â

"While premium increases are never ideal, this bill was necessary to help improve the strength and stability of FHA's single-family programs," comments Story. "We are encouraged that FHA Commissioner Stevens has indicated he may not need to raise premiums to the maximum, and we believe that a small increase in the annual premium, coupled with a decrease in FHA's up-front premium, will help stabilize FHA, while lowering closing costs for many borrowers."

Stevens has said the FHA will raise the premium to 0.85% for loans with loan-to-value ratios (LTVs) up to and including 95%, and up to 9% for loans with LTVs above 95%.

The changes are expected to supply the FHA's Mutual Mortgage Insurance Fund with approximately $300 million per month.

SOURCES: MBA, OpenCongress, FHA


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