Loans insured by the FHA on or after April 18 will be subject to higher mortgage insurance premiums, according to the U.S. Department of Housing and Urban Development.
In a bid to bolster the FHA’s capital reserves and help move private capital back into the mortgage market, the annual mortgage insurance premium on FHA loans will rise by a quarter of a percentage point, the second such increase since last year.
But the move only affects fixed-rate mortgages, including the popular 30-year fixed and the 15-year fixed.
The upfront mortgage insurance premium will remain unchanged at 1.0 percent.
“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,” said FHA Commissioner David H. Stevens, in a statement.
“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 change was related to the Obama Administration’s report to Congress last week, which called for tougher standards on government-backed mortgages in a bid to return the mortgage market to private hands.
On average, new FHA borrowers will pay roughly $30 more each month, but an estimated $3 billion will go toward the FHA’s depleted capital reserve annually.
The FHA is projected to insure $218 billion in mortgages in 2012.