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FHASecure to Be Expanded Via Risk Based Premiums


The Bush Administration said late last week that its FHASecure loan program would be expanded to help a larger number of less creditworthy borrowers by implementing risk-based mortgage insurance premiums.

Beginning July 14, the Federal Housing Administration will launch a so called “fair and flexible” premium structure to assist families who may not have access to prime-rate financing.

Currently, the FHA charges all borrowers a flat rate of 1.50 percent of the loan amount upfront and .50 percent annually in what they call a “one size fits all” approach.

But come summer, borrowers can expect to pay anywhere from 1.25 percent to 2.25 percent in upfront mortgage insurance premiums and up to .55 percent in annual premiums.

HUD believes this method will preserve low cost premiums for the most creditworthy borrowers and motivate those with less than perfect credit to improve their scores.

They cited one example using a loan amount of $150,000, revealing that the difference between the current 1.50 percent upfront premium and the highest possible 2.25 percent premium is only about $7 per month.

Additionally, the government agency noted that subprime borrowers were better off paying slightly higher premiums because mortgage rates will likely be lower than those found in the subprime market, assuming they can find/receive financing to begin with.

HUD said that via its recent expansions, it’s on pace to help roughly 500,000 families refinance into its affordable mortgage programs by year-end.

Learn more about the FHASecure refinance loan, including guidelines and requirements.

(photo: anarchosyn)

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