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Mortgage Insurance Premium (MIP) Requirements of FHA Loans
Friday, December 12th, 2008Mortgage Insurance is required on all 30 year fixed rate mortgages. There are two types of mortgage insurance premium payments that you will always incur.
There is an upfront mortgage insurance premium of 1.75% and a monthly mortgage insurance premium of .55% of the loan amount. These premiums were recently increased as part of the FHA overhaul legislated through H.R. 3221 passed in July, 2008.
To give you an idea of what this would translate to as far as actual costs, let’s use a $300,000 purchase price to give you some examples:
- Purchase Price: $300,000
- Down Payment: 3.5%
- Loan Amount: $289,500
Upfront MIP (Mortgage Insurance Premium) would be $5,066. FHA allows you to finance this as part of the loan. The monthly mortgage insurance premium would be $132.69 a month.
For the purposes of calculating what these insurance premiums would be for any loan amount is as follows.
- Multiply the purchase price x the down payment of 3.5% - This will give you your loan amount
- Multiply the loan amount x the upfront MIP of 1.75% - This will give you your upfront MIP
- Multiply the same loan x the monthly mortgage insurance premium of .55% - this gives you the annual sum of your monthly mortgage insurance premiums.
- Divide the annual sum of your monthly mortgage insurance premiums by 12 - this will give you your monthly mortgage insurance premium
If you would like to get more information about qualifying for FHA financing complete this simple, secure online form to receive a no pressure, no obligation qualification analysis.
If you have have additional questions about qualifying for an FHA loan for either Purchasing a new home or Refinancing your existing mortgage, contact us at 1-866-667-6724
How soon after a Bankruptcy or Foreclosure can you apply for a new loan?
Friday, December 12th, 2008Recent changes to Fannie Mae and Freddie Mac’s underwriting guidelines extend the time required before you are eligible for a new loan if you have filed a Bankruptcy or Foreclosure.
Fannie Mae and Freddie Mac until December 2008 only required that your Bankruptcy be discharged prior to application, Chapter 13 could be paid through refinance, as long as the Bankruptcy was filed at least 2 years prior to application. In the case of a foreclosure it was 4 years from foreclosure date.
As of December 2008 Fannie and Freddie increased these guidelines to 4 years for the date of discharge for bankruptcy and 5 years from foreclosure or short sale date.
FHA foreclosure and bankruptcy requirements remain unchanged and seem to be the only option for homeowners that have been hardest hit through the market crash of 2007/2008 (and maybe 2009?).
FHA requirements are 2 years from discharge for Bankruptcy and 3 years from Foreclosure or Short Sale date.
If you would like to get more information about qualifying for FHA financing complete this simple, secure online form to receive a no pressure, no obligation qualification analysis.
If you have have additional questions about qualifying for an FHA loan for either Purchasing a new home or Refinancing your existing mortgage, contact us at 1-866-667-6724
from Associated Press
Monday, September 29th, 2008AP
Dow plummets record 777 as financial rescue fails Monday
September 29, 9:13 pm ET
By Tim Paradis, AP Business Writer
| Dow dives 777 points, biggest single day fall ever, as House rejects financial bailout package |
NEW YORK (AP) — The failure of the bailout package in Congress literally dropped jaws on Wall Street and triggered a historic selloff — including a terrifying decline of nearly 500 points in mere minutes as the vote took place, the closest thing to panic the stock market has seen in years.
The Dow Jones industrial average lost 777 points Monday, its biggest single-day fall ever, easily beating the 684 points it lost on the first day of trading after the Sept. 11, 2001, terrorist attacks.
As uncertainty gripped investors, the credit markets, which provide the day-to-day lending that powers business in the United States, froze up even further.
At the New York Stock Exchange, traders watched with faces tense and mouths agape as TV screens showed the House vote rejecting the Bush administration’s $700 billion plan to buy up bad debt and shore up the financial industry.
Activity on the trading floor became frenetic as the “sell” orders blew in. The selling was so intense that just 162 stocks on the Big Board rose, while 3,073 dropped.
The Dow Jones Wilshire 5000 Composite Index recorded a paper loss of $1 trillion across the market for the day, a first.
The Dow industrials, which were down 210 points at 1:30 p.m. EDT, nose-dived as traders on Wall Street and investors across the country saw “no” votes piling up on live TV feeds of the House vote.
By 1:42 p.m., the decline was 292 points. Then the bottom fell out. Within five minutes, the index was down about 700 points as it became clear the bill was doomed.
“How could this have happened? Is there such a disconnect on Capitol Hill? This becomes a problem because Wall Street is very uncomfortable with uncertainty,” said Gordon Charlop, managing director with Rosenblatt Securities.
“The bailout not going through sends a signal that Congress isn’t willing to do their part,” he added.
While investors didn’t believe that the plan was a cure-all and it could take months for its effects to be felt, most market watchers believed it was at least a start toward setting the economy right and unlocking credit.
“Clearly something needs to be done, and the market dropping 400 points in 10 minutes is telling you that,” said Chris Johnson, president of Johnson Research Group. “This isn’t a market for the timid.”
Before trading even began came word that Wachovia Corp., one of the biggest banks to struggle from rising mortgage losses, was being rescued in a buyout by Citigroup Inc.
That followed the recent forced sale of Merrill Lynch & Co. and the failure of three other huge banking companies — Bear Stearns Cos., Washington Mutual Inc. and Lehman Brothers Holdings Inc., all of them felled by bad mortgage investments.
And it raised the question: Which banks are next, and how many? The Federal Deposit Insurance Corp. lists more than 110 banks in trouble in the second quarter, and the number has probably grown since.
Wall Street is contending with all of it against the backdrop of a credit market — where bonds and loans are bought and sold — that is barely functioning because of fears that anyone lending money will never be paid back.
More evidence could be found Monday in the Treasury’s three-month bill, where investors were stashing money, willing to accept the tiniest of returns simply to be sure that their principal would survive. The yield on the three-month bill was 0.15 percent, down from 0.87 percent and approaching zero, a level reached last week when fear was also running high.
Analysts said the government needs to find a way to help restore confidence in the markets.
“It’s probably fair to say that we are not going to see any significant stability in the credit markets or the stock market until we see some sort of rescue package passed,” said Fred Dickson, director of retail research for D.A. Davidson & Co.
The bailout bill failed 228-205 in the House, and Democratic leaders said the House would reconvene Thursday in hopes of a quick vote on a revised bill.
“We need to put something back together that works,” Treasury Secretary Henry Paulson said. “We need it as soon as possible.”
The Dow fell 777.68 points, just shy of 7 percent, to 10,365.45, its lowest close in nearly three years. The decline also surpasses the record for the biggest decline during a trading day — 721.56 at one point on Sept. 17, 2001, when the market reopened after 9/11.
In percentage terms, it was only the 17th-biggest decline for the Dow, far less severe than the 20-plus-percent drops seen on Black Monday in 1987 and before the Great Depression.
Broader stock indicators also plummeted. The Standard & Poor’s 500 index declined 106.62, or nearly 9 percent, to 1,106.39. It was the S&P’s largest-ever point drop and its biggest percentage loss since the week after the October 1987 crash.
The Nasdaq composite index fell 199.61, more than 9 percent, to 1,983.73, its third-worst percentage decline. The Russell 2000 index of smaller companies fell 47.07, or 6.7 percent, to 657.72.
A huge drop in oil prices was another sign of the economic chaos that investors fear. Light, sweet crude fell $10.52 to settle at $96.36 on the New York Mercantile Exchange as investors feared energy demand would continue to slide amid further economic weakness. And gold, where investors flock when they need a relatively secure investment, rose $23.20 to $911.70 on the Nymex.
Marc Pado, U.S. market strategist at Cantor Fitzgerald, said investors are worried about the spread of troubles beyond banks in the U.S. to Europe and other markets.
“Things are dying and breaking apart,” he said.
The federal Office of Thrift Supervision, one of the government’s banking regulators, indicated that the market was overreacting to the House vote and that its fears about the financial system are misplaced.
“There is an irrational financial panic taking place today, and we support and applaud the continuing efforts of Secretary Paulson and congressional leadership to restore liquidity and public confidence,” John Reich, Director of the federal Office of Thrift Supervision, said in a statement.
The plan would have placed caps on pay packages of top executives that accepted help from the government, and included assurances the government would ultimately be reimbursed by the companies for any losses.
The Treasury would have been permitted to spend $250 billion to buy banks’ risky assets, giving them a much-needed cash infusion. There also would be another $100 billion for use at the president’s discretion and a final $350 billion if Congress signs off.
But Wall Street found further reason for worry overseas. Three European governments agreed to a $16.4 billion bailout for Fortis NV, Belgium’s largest retail bank, and the British government said it was nationalizing mortgage lender Bradford & Bingley, which has a $91 billion mortgage and loan portfolio. It was the latest sign that the credit crisis has spread beyond the U.S.
Business Writers Joe Bel Bruno in New York and Christopher S. Rugaber in Washington contributed to this report.
Source: http://biz.yahoo.com/ap/080929/wall_street.html?.v=101
Big Bailout, Homeowners Awaiting Answers
Friday, September 19th, 2008
H.R. 3997, EMERGENCY ECONOMIC STABILIZATION ACT OF 2008 (EESA)
Full Copy of the Bill Text Here
After a long week of lawmaker negotiations, we now have some tentative answers to some of our questions. We first posed these questions after learning of the bailout proposal. We are most interested is how this bailout relates to mortgages.
Q. Will the bailout help homeowners? Since this bailout seems to be directed squarely at Wall Street will the congress pack homeowner assistance into this impending legislation such as a mechanism for providing boilerplate loan modifications.
A. Initially, it appeared that the bailout would include a provision for bankruptcy judges to re-write the terms of mortgages. It no longer appears that this will be a part of the new legislation.
What will be included is a commitment from the treasury to provide loan modifications and refinances for mortgages it acquires through the purchase of mortgage backed securities. We don’t know if the government will provide these loan modification services directly or if they will continue to look for non-profit, third party facilitators such as helpUmodify.org to assist in these modifications.
Homeownership Preservation
EESA requires the Treasury to modify troubled loans - many the result of predatory lending practices - wherever possible to help American families keep their homes. It also directs other federal agencies to modify loans that they own or control. Finally, it improves the HOPE for Homeowners program by expanding eligibility and increasing the tools available to the Department of Housing and Urban Development to help more families keep their homes.
Q. Will this bailout put a temporary freeze on Mortgage Foreclosures? Homeowners who have been panicked at the possibility of loosing their homes want to know what will be in this bailout for them.
A. No, there will not be any type of moratorium on bank foreclosures in this bill.
Q. Will the purchasing of illiquid assists (toxic mortgage debt) by the fed affect the way that banks will negotiate workouts for homeowners in trouble? Many homeowners have their unaffordable properties up for sale. Since many of these properties are upside-down, the sales are know as “Short-Sales” where the bank has agreed to accept less then what is owed on the property. If the fed is willing to pay more for these non-performing loans than the bank would receive on a short sale, those workout options could be taken off the table. This may also hold true for homeowners seeking a modification of their rate and terms.
A. We have some information on the answer to this question. We have learned that the toxic mortgage debt that will be purchased by the Treasury will be done on a Reverse Auction. This means that banks will be competing to sell their bad debt and thus affording the treasury the benefit of purchasing these assets at the lowest possible price. Therefore we believe this action will not undercut the incentive for banks to continue to work with homeowners.
Q. Who will be responsible for servicing mortgage debt that is purchased by the Fed? If the Fed purchases these toxic mortgages will they also transfer the services rights to a government entity or will they remain with their current servicers.
A. We have not received any information on this.
Q. Will there be compensation limitations for the heads of the banks and investment firms that will benefit from this bailout? The way this question gets answered will have a profound impact on how the public views this bailout. If the leaders of these companies reap massive paydays as a byproduct of this bailout, American taxpayers will be upset.
A. Yes, this bill limits the so-called ”golden parachutes” for top executives and provides for strong congressional oversight. In addition, there will be a limit to excessive compensation to employees of the firms that will benefit from the bailout.
No Windfalls for Executives
Executives who made bad decisions should not be allowed to dump their bad assets on the government, and then walk away with millions of dollars in bonuses. In order to participate in this program, companies will lose certain tax benefits and, in some cases, must limit executive pay. In addition, the bill limits “golden parachutes” and requires that unearned bonuses be returned.
FHA Increases Down Payment Requirement to 3.5%
Wednesday, September 3rd, 2008H.R. 3221, the Housing and Economic Recovery Act of 2008 is a 700 page bill. We will continue to report the details of this bill as we learn more about them.
SEC. 2113. CASH INVESTMENT REQUIREMENT AND PROHIBITION OF SELLER-FUNDED DOWN PAYMENT ASSISTANCE.
Paragraph (9) of section 203(b) of the National Housing Act (12 U.S.C. 1709(b)(9)) is amended to read as follows:
(9) CASH INVESTMENT REQUIREMENT-
(A) IN GENERAL - mortgage insured under this section shall be executed by a mortgagor who shall have
paid, in cash or its equivalent, on account of the property an amount equal to not less than 3.5 percent of the appraised value of the property or such larger amount as the Secretary may determine.
Stay tuned in as more comes out on the contents of this bill…..
House OKs Mortgage Rescue Bill - Is this really a “Mortgage Bail Out ?”
Friday, July 25th, 2008On Wednesday the House voted 272-152 to pass H.R. 3221, The American Housing Rescue & Foreclosure Prevention Act that will offer up to $300 billion in assistance to troubled homeowners and offer government support for Fannie Mae and Freddie Mac.
This is a a 700 page bill that includes many moving parts. President Bush has been long threatening to veto this bill as package and asked that it be revised. It appears that this current version is not going to face any challenges when the President sees it shortly.
Helping At-Risk Borrowers
The part of this bill that is good news for challenged homeowners looking at adjusting interest rates and negative equity involved FHA insuring up to $300 Billion in new 30 year fixed rate mortgages for at-risk borrowers living in owner-occupied homes.
In a nut shell, here are the proposed terms outlined:
- The existing lender must agree to “write down” the balance of the existing loan to 90% of the homes’ current appraised value.
- Lenders must agree to also pay upfront fees to the FHA equal to 3% of the home’s appraised value.
- Borrowers must agree to pay an annual premium to the FHA equal to 1.5% of thier new loan balance.
- Borrowers must agree to share with the government any profit they realize from selling or refinancing.
Helping Hand Comes At A Price
Ok, so is this a cure-all or a “bail out”? It certainly does not seem that way to me. For borrowers that qualify for this program, it will still come at a large cost. For instance, if your home is now worth $250,000 - you must pay $3,750 a year to FHA? Even if they break it up over 12 months that adds $312.50
Add the equity share if you sell or refinance and it starts to get a little less friendly. I saw this in the early 2000’s when folks were just starting to see huge equity increases. One specific case was a county provided silent second mortgage used to purchase the home. It included an equity share clause similar to this one.
The “share” of equity for this particular loan was over $17,000!
Take into consideration also that although prices will continue to drop if left to follow it’s natural course of market correction, it is likely that homes are very close to the bottom in many areas around the U.S. If you “commit” to a loan that is 90% of current appraised value at the “bottom” of the market…..That equity share could mean big bucks!
Historically, Real Estate doubles in value every 10 years. I’m sure this will be the case with many homes in many areas at the significantly deflated prices resulting from this unique collapse of the secondary and credit markets.
It will be interesting to see what happens and how many homeowners it helps…..And don’t let me seemingly pessimistic and cautious reservation about this bill fool you….I see a rainbow!
The Rainbow - The Answer to Short Sales and Loan Modifications
I believe that the passing of this bill is going to help MANY, MANY home owners currently having challenges with their payments, and here’s why.
- This bill is going to force banks to start considering principle reduction as a method of preventing foreclosure.
- This bill puts the responsibility back on the banks to keep people in their homes.
- A Bank participating in this program is forced to pay big fees - 3% of the appraised value
Let me explain. If the banks are already being forced to consider principle reduction (reduce amount of loan to reflect current home values”, why would they pay FHA an additional 3% instead of simply modifying the note themselves?
3% does not seem like a lot of money until you multiply it by tens of thousands of loans. It makes sense to me that if the banks hand is forced, they will accept that principle reduction is a vehicle that will keep their clients (home owners, investors) happy - and they will begin to look for ways to save money….say….3%
What I don’t know is how valuable the Government Mortgage Insurance will be to these banks. As with all legislation, what looks good on paper does not always mean there’s a practical application in a free market society. We will see.
Either way you cut it, i think it will help many home owners stay in their homes. I think it will force banks to do the “right” thing and do what it takes to keep folks in their homes. I believe that it will begin to restore confidence in foreign and domestic investors and bring liquidity back to mortgage backed securities.
There you have it….that’s my .02 - I guess it’s just wait and see time now.
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