FHA Secure Modifications

FHA Secure Modifications
The Bush Administration has approved modifications to the FHA Secure program that will help even more struggling homeowners while reducing the risk to tax payers.

Beginning July 14, 2008, the FHA will implement its fair and flexible premium pricing structure. Currently the FHA’s premium structure charges all borrowers 1.50 percent of the loan balance up front and 0.50 percent annually regardless of the borrowers’ credit situation.

The new modifications allow the FHA to charge anywhere from 1.25 percent to 2.25 percent upfront to borrowers based upon their credit risk. On a $150,000 mortgage loan, the difference between the 1.50 percent and 2.25 percent upfront fees would cost roughly $7 a month.

"Charging borrowers a fair premium based on their credit risk means that they pay their own way, allows FHA to reach more borrowers, and helps create a more financially sound FHA. That's good news since FHA, like any other insurance company, supports its flagship program through its premiums - not taxpayer dollars,” said Assistant Secretary for Housing - Federal Housing Commissioner Brian D. Montgomery.

The new structure gives borrowers the ability incentives to improve their credit to lower their monthly payments. Besides credit, other considerations such as down payment and equity will help the FHA determine the risk of the borrower and the costs of the upfront fees.

Submitted by admin on 5/11/08
Source: HUD