The FHA (Federal Housing Administration,) which insures a large percentage of the mortgages issued in the market will announce more-stringent lending requirements and higher borrower fees today.
Home purchasers who get an F.H.A.-insured loan will soon have to pay a higher initial insurance premium. The new premium will be 2.25 percent of the value of the loan, up from 1.75 percent. ( $1000 on a $200k mortgage)
The amount of closing costs that sellers can pay will also be reduced starting this summer. The maximum amount of assistance will drop from its current amount of 6 percent to 3 percent of the value of the property.
The FHA, which has taken on a major role in the housing market during the economic downturn, doesn’t lend money to home buyers, but insures lenders against default on loans that meet FHA criteria.
The value of the FHA’s reserves to cover losses has fallen to $3.6 billion, about 0.5% of the $685 billion in loans outstanding, down from 3% a year earlier. Congress requires the agency to maintain a 2% capital-reserve ratio. If the larger upfront fee had been in place last year, the FHA would have boosted its reserves by more than $1 billion.
The FHA, which backs over 40% home loans in certain housing markets, has come under fire for insuring loans with little or no money down as home prices have plunged over the past three years. With its reserves falling, the agency has been forced to walk a tightrope between protecting taxpayer dollars and helping to facilitate the housing recovery.
How do you think this will affect the housing market ?
Filed under: Business, Real Estate Statistics, virginia, virginia real estate, williamsburg va |
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