On June 11, 2012, borrowers holding FHA mortgages endorsed by the FHA prior to June 1, 2009 were able to take advantage of “grandfathered” mortgage insurance premiums. FHA applications spiked sharply in June after the announcement of the new MIP’s. Those eligible for the new program are able to pay reduced rates for both immediate an FHA Mortgage Application Volume Tripled in June annual mortgage insurance premiums. Other benefits include no verification of credit or employment, no appraisal, reduced principal and interest, and the opportunity to refinance to a shorter-term loan and recoup equity sooner. Overall, the new streamlined program offers new premiums that are significantly lower than those paid by current FHA borrowers.
In June, banks were swamped with 102,640 refinance applications for FHA mortgages. That figure is triple the number of applications processed in May, a mere 34,000.
Here are the details of the new program that is specifically for long-time FHA approved homeowners:
– All loans: 0.01% upfront mortgage insurance premium
– All loans (except 15-year fixed with LTV of 78% or less): 0.55% annual mortgage insurance premium
– 15-year fixed with LTV of 78% or less: No annual mortgage insurance premium
An article on the site, www.housingwire.com, explained more about the logic behind the program by saying the idea, “was to reduce future risk on the FHA portfolio.” However, the Housing Wire site went on to report that by June, serious delinquencies had risen to 721,000 mortgages, which represents 9.5% of FHA mortgages. That is the highest level since the start of 2012.
Several of the large banks, including Wells Fargo, restricted their involvement in the program to only loans they already held in their portfolios. A Bank of America Merrill Lynch analysis predicts that as the demand for the Home Affordable Refinance Program gains steam, the reduced FHA-MIP program will begin to dissipate.