Written By: Glenn Michaels, Op-Ed Writer
In most of the country property values are increasing after a period of property values being stable or declining. The only area not increasing dramatically at the moment is in the Northeast. Who knows how long that will last?
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Interest rates are also on the move, an upward move. Every spring/summer the demand for mortgage money goes up as people want to move while their children are out of school for the summer.
Another reason mortgage rates are increasing is due to the fact that it appears that the United States economy is heating up. Unemployment is beginning to drop and many parts of the economy are beginning to recover. Mortgage rates tend to move based on the movement of the bond market.
Good economic news is bad news for the bond market as bonds go down and the rates will go up. Bad economic news makes the bonds go up and the rates will go down. The Federal Reserve may intercede to arbitrarily try to keep the mortgage rates low. Low rates tend to stimulate the economy.
Beginning June 3, 2013 the annual mortgage insurance premium will increase and the length of time that a homeowner must have annual mortgage insurance has also increased. In some cases the annual mortgage insurance premium has increased anywhere from 10 basis points to 45 basis points. In addition homeowners must now have the annual mortgage insurance from a minimum of eleven (11) years to as high as the mortgage term depending on the initial loan to value. Previously, borrowers had to pay the annual mortgage insurance for at least five years.
Borrowers who had a loan term of 15 years or less with a loan value of 78% or less did not have to pay an annual mortgage insurance premium. Now they have to pay 45 basis point for a minimum of eleven years.
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Prior to the change borrowers had to pay the annual mortgage insurance premium for a minimum of five years or when the loan reached 78% loan to value. Now all FHA borrowers will pay the annual mortgage insurance for at least eleven years and the annual mortgage insurance does not stop at 78% of value.
Let’s hope the added costs does not kill the FHA market as the FHA market is a unique one!
About The Author
Glenn Michaels - As an op-ed writer, Glenn Michaels is a mortgage underwriting instructor for CampusUnderwriter (www.MortgageUnderwriter.org). As a BBA & FHA DE Underwriter, Glenn is a Pace University graduate who also graduated from New York University’s School of Mortgage Finance. Glenn has conducted numerous training classes and has worked in the mortgage banking industry for 38 years.
