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The Federal Housing Administration (FHA) announced this week that it will be raising its annual mortgage insurance premium (MIP) by a quarter of a percentage point on all 30- and 15-year loans. This increase comes as part of a new premium structure for FHA-insured mortgage loans the FHA is putting in place in response to the Obama administration’s housing finance reforms. The new structure will apply to all new loans insured by the FHA on or after April 18, 2011. Existing and reverse mortgage (HECM) loans insured by FHA are not impacted by the pricing change.
The following is an excerpt from a DSNews article reported on Februay 15, 2011:
“FHA Commissioner David Stevens says the annual payment adjustment will increase borrowers’ costs about $30 per month and will help to strengthen the agency’s depleted coffers.
‘After careful consideration and analysis, we determined it was necessary to increase the annual mortgage insurance premium at this time in order to bolster the FHA’s capital reserves and help private capital return to the housing market,’ Stevens said in a statement.
He continued, ‘This quarter point increase in the annual MIP is a responsible step towards meeting the congressionally mandated two percent reserve threshold, while allowing FHA to remain the most cost effective mortgage insurance option for borrowers with lower incomes and lower down payments.’
The 25 basis point rise was proposed last week as part of the Obama administration’s report to Congress on reforming the nation’s housing finance system, and was detailed in President Obama’s fiscal year 2012 budget released Monday.
According to FHA, this premium change enables the agency to increase revenues at a time when it is critical to safeguard the stability of its Mutual Mortgage Insurance fund, which had capital reserves of approximately $3.6 billion at the end of FY 2010. The new pay structure is estimated to contribute nearly $3 billion annually to the fund.”
According to a report released by Credit Suisse on January 6, 2011 demand in the Charlotte home market remains weak as buyers fear further price declines. Charlotte, NC is the 13th largest market in the country. The following are quotes directly from the December 2010 report for the Charlotte, NC real estate market:
“Buyer traffic remained at weak levels well below agents’ expectations in December, as our traffic index fell slightly to 20 from 21 in December (readings below 50 point to traffic levels below agents expectations). Agents said that there was little change to speak of in December relative to November, as buyers remain fearful and are willing to wait on the sidelines until more concrete signs of a bottom emerge. Another agent also said that the recent spike in mortgage rates has started to hurt.
Prices continue to fall. Home prices fell further in December, as our home price index
improved to 17 from 7 in November, but remained far below a neutral reading of 50 (any
reading below 50 indicates lower home prices over the past 30 days). Prices continue to
come under pressure as a result of the weak demand and elevated inventory levels,
especially as distressed properties continue to come back to market. Inventory appeared
stable in December, as our home listings index improved to 46 from 43 in November,
essentially in-line with a neutral level of 50. However, the length of time needed to sell a
home increased further, reflecting the weakness in demand, as our time to sell index came
in at 18 in December (from 11 in November), with readings below 50 indicating a longer
time needed to sell a home over the past month. The longer time to sell is typically a
negative leading indicator for home prices.”
If you or someone you know are looking for a home in the Charlotte Metro and surrounding areas, click here.
For more information on Credit Suisse, click here.
The election is over and so is the need to keep interest rates artificially low. If we absorb the pain now, we’ll be less likely to remember it during the 2012 election. Don’t wait! Rates are rising!
Interest Rate Roundup for Dec. 2, 2010 from Bankrate.com
4.71% (30-year fixed)
0.36 (average points)
Here’s a look at the state of mortgage rates from Bankrate.com’s weekly national survey of large banks and thrifts conducted Dec. 1, 2010.
Mortgage products took a sharp leap upward this week, with the 15- and 30-year home loans rising significantly amid signs that the U.S. economic recovery may also be gathering strength.
The 30-year fixed rate mortgage shot up 13 basis points, to 4.71 percent, its highest level since last summer. A basis point is one-hundredth of 1 percent.
The story was much the same for 15-year fixed rate mortgages, although their ascent was not as steep, climbing 10 basis points to 4.07 percent.
The rises were more moderate for adjustable-rate mortgages. The popular 5/1 ARM rose 8 basis points, settling at 3.74 percent. With a 5/1 ARM, a mortgage has a fixed rate for the first five years, and is adjusted annually — based on market conditions — for the remainder of the loan’s term.
It was the highest rate for 30-year mortgages since July. Bankrate’s July 21 national survey found an average rate of 4.74 percent, after which home loans began a descent that lasted until early November and brought mortgages to record low rates.
Although it is difficult to establish a direct relationship — and the housing market remains troubled by virtually every measure — the strengthening of mortgage rates is occurring as the tepid economic recovery is also gaining momentum.
On Wednesday, the Institute for Supply Management, which tracks manufacturing industries, said factory output has now risen for 16 months in a row. In addition, a Federal Reserve survey found that 10 of its 12 regions are seeing economic expansion, while the other two — St. Louis and Philadelphia — have mixed conditions.
The economic indicator most relevant to housing, however, is unemployment. The country will get an indication of whether the labor market is recovering on Friday, when the government releases figures for unemployment and job creation for the month of November.
Find out monthly mortgage payments using Bankrate’s mortgage calculator.
— Gregg Fields
To take advantage of low mortgage rates and low interest rates while you can, contact a Realtor who can help you! Click here.