HARP 2.0 and Private Mortgage Insurance

May 11, 2012 by 2 Comments

The Home Affordable Refi Program (HARP 2.0) is a refinance program to help home owners who have lost home equity take advantage of today’s historic low interest rates.  In order to qualify for this program, the existing mortgage must have been securitized by Fannie Mae or Freddie Mac prior to June 1, 2009.  Learn more about the HARP 2.0 program here.

Loans with private mortgage or lender paid mortgage insurance (LPMI) who meet the securitization requirement are also eligible for HARP 2.0. The terms of the private mortgage insurance, as far as the rate, remains the same as what the home owner has on their existing loan. The existing coverage is transferred to the new HARP 2.0 mortgage if the coverage is still in effect.

Borrower Paid Mortgage Insurance (bpmi) is the most traditional form of mortgage insurance. Homeowners will see this in their monthly mortgage payment. If you currently have private mortgage insurance included in your monthly mortgage payment, you will have it in your new HARP 2.0 mortgage payment too. 

Lender Paid Mortgage Insurance (lpmi) is not “seen” in your mortgage payment. LPMI is essentially financed into your loan. Homeowners who have LPMI probably traded the monthly pmi payment for a slightly higher interest rate when they obtained their last mortgage with a loan to value greater than 80%. Often times, LPMI scenarios offered lower payments than bpmi or combo loans at the time they were originated.

Some mortgages with LPMI were “single premium” meaning the coverage was paid for in one lump “single premium”.  Single premium LPMI may be transferred to a new HARP 2.0 mortgage. 

It’s also possible that the existing LPMI may be paid monthly by the lender. In this case, the private mortgage insurance company may be able to convert the “LPMI” from “lender paid” to “borrower paid”.  The borrower is trading their higher rate mortgage with LPMI for a much lower rate with monthly pmi in their mortgage payment. The monthly savings has been significant.

It’s my understanding that once PMI is transferred to a new HARP 2.0 mortgage, private mortgage insurance companies consider this a new loan. This means that when the pmi may drop off is reset. Typically pmi drops off your mortgage when your loan to value reaches 78% of the mortgages loan to value based on the appraised value.  If your home is significantly underwater, the private mortgage insurance will likely remain until you can refinance.  PLEASE DO NOT LET THIS STOP YOU FROM GETTING A HARP 2.0 QUOTE. Mortgage rate quotes are free and it’s doesn’t hurt to find out what your options are.  Click here for your HARP 2.0 quote for your home located anywhere in Washington state.

Here are two scenarios from quotes I provided yesterday, May 10, 2012, for HARP 2.0 mortgages with existing lender paid mortgage insurance (both borrowers have excellent credit):

Owner occupied home in Federal Way with a loan amount of $283,000 and an estimated value of $186,000 with LPMI single premium. With 30 year fixed mortgage and a rate of 4.375% (apr 4.515) they are reducing their monthly mortgage payment by $459 per month!

Owner occupied home in Renton with a loan amount of $311,000 and an estimated value of $215,000 with LPMI that was being paid monthly by the lender. 30 year fixed mortgage and a rate of 4.500% (apr 4.569%) they are reducing their monthly mortgage payment by $422 even with the lpmi converted to borrower paid.

NOTE: The difference in rate above due to having a mortgage priced with discount or rebate. How you have your mortgage priced (with discount or rebate credit) is up to you!

If you would like me to provide you a quote for your HARP 2.0 refinance on your home located anywhere in Washington, please click here.

I am required to have the language below if I am soliciting your Home Affordable Refi for your home in Washington…and yes, I would love to help you with your HARP (or any) refinance:

Freddie Mac and Fannie Mae have adopted changes to the Home Affordable Refinance program (HARP) and you may be eligible to take advantages of these changes.  

If your mortgage is owned or guaranteed by either Freddie Mac or Fannie Mae, you may be eligible to refinance your mortgage under the enhanced and expanded provisions of HARP.

You can determine whether your mortgage is owned by either Freddie Mac or Fannie Mae by checking the following websites:

www.freddiemac.com/mymortgage or

http://www.fanniemae.com/loanlookup/


Filed Under: HARP - Home Affordable Refi, Mortgage Insurance Tagged With: , ,

Less than two weeks remaining before FHA mortgage insurance premiums jump higher

March 27, 2012 by Leave a Comment

If you are considering an FHA mortgage, you have less than two weeks to obtain an FHA case number at our current FHA mortgage insurance premiums.  Effective April 9, 2012, HUD is increasing the cost for FHA insured mortgages for purchases, FHA refinances and many FHA streamlined refinances that were endorsed after May 31, 2009.

NOTE: Some borrowers doing an FHA streamlined refinance may be eligible for reduced rates and should hold off on their streamlined refi – please check with your local mortgage originator to see if this applies to you.

Mortgage originators can only provide an FHA case number if they have a bona fide transaction, including a complete loan application. Borrowers in the process of obtaining FHA financing should confirm with their mortgage originator that they indeed have an FHA case number. I recommend you ask your mortgage originator for your case number.  

 Borrowers who are barely qualifying with higher debt to income ratios may find they qualify for less with FHA mortgage payments increasing.  If you are currently preapproved with FHA financing, double check with your lender to make sure you still qualify for the same loan amount and sales price once the increased mortgage insurance premiums go into effect.

FHA borrowers with "high balance" loan amounts will be whammo'd again as HUD increases their mortgage insurance premiums again effective for case numbers issued on or June 11, 2012.  In the greater Seattle area, this would be FHA loan amounts from $417,001 to $567,500.

Here's a link to 2012 FHA loan limits in Washington State.

If you've been considering an FHA streamlined refi – please do not assume that because your loan closed prior to May 31, 2009 that it was endorsed by May 31, 2009. Sometimes it may take a couple months for HUD to endorse (insure) the FHA loan. It's possible that you may have closed in March of 2009 and HUD may not have endorsed it until June, 1 2009 or later, making this loan not eligible for the reduced FHA mortgage insurance rates.

If you are interested in an FHA mortgage (or just about any home loan!) for your home located in Washington, I'm happy to help you!  I have been originating mortgages, including FHA, at family owned and operated Mortgage Master Service Corporation for the last 12 years.  

Filed Under: FHA, Mortgage Insurance

Considering refinancing your FHA mortgage? Here’s what you need to know NOW

March 9, 2012 by 2 Comments

 

FHAStreamlined

HUD announced dramatic changes to their mortgage insurance premiums this week. If you have been considering refinancing your existing FHA mortgage by doing an FHA streamlined, you need to be aware of a couple of dates and which should cause you to either take action now or wait for your refi. 

 

HUD has finally decided to reduce the mortgage insurance premiums on FHA streamlined refinances.  HOWEVER it only applies to exisiting FHA loans that were endorsed prior to June 1, 2009.  When your loan was "endorsed" is completely different than when your loan closed.  HUD may take several weeks to a couple months after closing to endorse (insure) an FHA mortgage.  You could have closed in April of 2009 and not have your mortgage endorsed by HUD until after June 2009 and therefore not qualify for the reduced mortgage insurance rates.

 

If you closed the FHA mortgage you want to streamline refinance prior to May 31, 2009, contact your local mortgage originator to see when your mortgage was endorsed by HUD.  If your home is located anywhere in Washington State, I'm happy to help you with your FHA refinance and determining your endorsement date. (Currently HUD does not have a way for consumers to access this information that I'm aware of).  IF your mortgage was endorsed by HUD prior to June 1, 2009, you may want to consider delaying your FHA streamlined refinance for a few weeks until June 11, 2012.  Mortgage insurance premiums will be dropped, for those who qualify based on the endorsement date, to 0.01% for the upfront funding fee and the annual fee will be cut in half to 0.55%.  

UPDATE APRIL 11, 2012: WE ARE ACCEPTING APPLICATIONS FOR FHA STREAMLINED REFI'S with reduced mortgage insurance – you DO NOT NEED TO WAIT UNTIL JUNE 11, 2012 TO REFI! 

If your existing FHA insured mortgage was endorsed (or closed) after May 31, 2009, you will want to consider an FHA streamline refinance NOW as mortgage insurance premiums are going up. Remember, it's possible that your loan may have closed weeks before May 31, 2009 and NOT be endorsed by HUD until after the cut-off.  Effective on Case Numbers (this is different than your loan application and may take place after your loan application) issued April 9, 2012 and later, mortgage insurance premiums are going up.  The upfront premium will be 1.75% and monthly is increasing 0.10 for annual mi premiums. In early June, high balance FHA loans (loan amounts $417,001 to $567,500 in the greater Seattle area) will go up an additonal 0.25% for annual mi premiums.

 

Bottom line:  
  • If you closed your FHA loan prior to 2009 with your existing FHA loan, it's probably safe to assume your loan was endorsed by HUD in time to receive reduced MI rates and you may want to WAIT.  
  • If you closed your FHA mortgage from early 2009 to May 2009, you may need to check with your mortgage originator to see when your loan was endorsed.
  • If you closed your FHA mortgage from June 2009 or later, odds are you do not qualify for the reduced rate and, if you don't act quickly (March is your last month) to start your FHA streamlined refinance, the higher mortgage insurance rates could make it so that it's no longer worth while to refinance despite current low rates. REFI NOW if you are interested.

 

Don't delay – check out your options now!  Remember, FHA streamlined refinances do not require an appraisal – it does not matter what the current value of your home currently is.

 

As I mentioned, I am happy to help you with your mortgage needs with homes located anywhere in Washington, where I'm licesned to originate mortgages.

 

Filed Under: FHA, Mortgage Insurance, Refinance

Preapproved with FHA Financing? You Better Double Check with your Lender.

March 8, 2012 by Leave a Comment

If you are currently preapproved to buy a home using FHA for your financing, I highly recommend you check with your mortgage originator to make sure your preapproval is still valid.  

Why the worry?  FHA will have higher mortgage insurance rates effective with new loans (case numbers issued as of) April 9, 2012.  How much somebody is preapproved for is based on their debt to income ratios, which includes the proposed new mortgage payment.

Based on the scenarios I used on my post announcing these changes, a loan amount of $417,000 would see an increase in payment of $48.95.  For a borrower who’s currently maxed out on their debt to income ratios (DTI), this could reduce their borrowing power by about $10,500.  FHA “jumbo” borrowers are hit extra hard with FHA’s additonal tax fee, my previous post for a loan amount based on the Seattle FHA loan limit of $567,500 has an increase in payment of $183.85. For the borrower pushing their DTI, $183.85 increase in monthly payment pencils out to $39,700 in less home someone will qualify for.

Even if your preapproval letter states it’s valid until a certain date beyond April 9, 2012, it is subject to “changing market conditions”. Your scenario is not “locked in” or approved until you have a signed around contract that you’ve submitted to your lender to complete your loan application. Changing mortgage rates and property taxes also impact how much you qualify for.

Your mortgage originator can (and should) review your current preapproved scenario and plug in the mortgage insurance rates to determine how much your payment will be going up and to see if it impacts how much you’re preapproved for. 

If you are considering buying or refinancing a home anywhere in Washington State, I’m happy to help you! Please click the links at the top of this page for a rate quote or to apply.

PS: This also impacts home owners who are considering refinancing from a non-FHA loan to an FHA or who are doing a credit qualifying (full doc) FHA streamlined refinance.

Filed Under: FHA, Mortgage Insurance, Residential Purchase Tagged With: ,

HUD issues Mortgagee Letter Conforming Changes to Mortgage Insurance Premiums

March 6, 2012 by Leave a Comment

Hot off the press!  HUD just released Mortgagee Letter 12-4 addressing all of the changes to FHA mortgage insurance premiums. *Unless your doing an FHA streamlined refinanced of a mortgage that was "endorsed" on or before May 31, 2009; your FHA mortgage insurance premiums are going up. 

Upfront mortgage insurance premium increasing effective April 9, 2012. Currently the rate is 1% of the loan amount. Effective with case numbers issued April 9, 2012 and later, the premium will increase to 1.75%.

Increase to annual mortgage insurance premiums go into effect April 9, 2012. This increase is due to the Temporary Payroll Tax Continuation Act of 2011.  NOTE: if you have a 15 year amortized FHA mortgage with a 78% loan to value, there is no annual mortgage insurance premiums. 

 FHAAnnualMIP

FHA's annual mortgage insurance is paid monthly. The bps is multiplied by the FHA base loan amount to determine the premium and then divided by 12 months.  A $100,000 loan with a loan to value over 95% would have an annual MIP of $1200. Divide this by 12 and the monthly premium is $100.

High Balance FHA annual mortgage insurance premiums will increase an additional 25 bps with case numbers assigned on or after June 11, 2012.  In the greater Seattle area, this will impact FHA loan amounts of $417,001 to $567,500.  If you have a higher FHA loan amount originated on or after June 11, 2012, add an additional 25 bps to the figures in the table above.

The above increases will impact all newly originated FHA mortgages for purchase and refinances, unless the home owner qualifies for the new reduced mortgage insurance rates with an FHA streamlined refi. The changes to mortgage insurance do not apply to FHA's reverse mortgages.  Keep reading…

FHA Streamlined Refinances will have reduced FHA mortgage insurance premiums IF the FHA loan being refinanced was *endorsed on or before May 31, 2009 effective on case numbers issued on or after June 11, 2012.  Upfront mortgage insurance premiums will be reduced from 1% to 0.01% of the base loan amount and the annual mortgage insurance will be reduced to 0.55% of the loan amount. Borrowers must be current on their existing FHA insured mortgage.

If your FHA loan being refinanced was endorsed June 1, 2009 or later, then the reduced rate does not apply. Your FHA mortgage insurance rates will be increasing based on the information above effective April 12, 2012.

NOTE: *Endorsed means when FHA actually insures the mortgage. This often happens months after closing! 

If I can help you with your FHA refinance or purchase for your home located anywhere in Washington, please contact me.

Related post:

FHA Mortgage Insurance to increase April 2012

FHA to reduce mortgage insurance premiums for some FHA streamlined refi's


Filed Under: FHA, Mortgage Insurance

FHA to Reduce Mortgage Insurance Rates for some FHA Streamlined Refi’s

March 6, 2012 by 1 Comment

Today HUD announced that beginning June 11, 2012, FHA will REDUCE the cost for an FHA streamlined refinance for FHA insured mortgages that were originated prior to June 1, 2009. A mortgagee letter will follow to make the following changes official:

Upfront mortgage insurance (UFMIP) will be reduced to 0.01% (from 1.00%).

Annual mortgage insurance (typically paid monthly) will be reduced to 0.55% (cut in half from 1.10%).

This is great news to those who originated their FHA loans prior to June 1, 2009. Once I receive the mortgagee letter from HUD, I'll be sure to update you.  We'll need clarification on how HUD defines "origination".  UPDATE:  FHA's Mortgagee Letter clarifies that loans must be "endorsed" by HUD prior to June 1, 2009.  This is different than your closing date and typically takes place weeks after closing.

FHA streamlined mortgages are popular right now considering today's low mortgage rates and that they do not require an appraisal. 

Currently, a Seattle area home owner doing an FHA streamlined refinance with a loan amount of $400,000 and credit scores of 720 or higher would have a rate of 3.750% (apr 4.449) with a principal, interest and mortgage insurance (PIMI) payment of $2,234.59.  With the proposed reduced FHA mortgage insurance, assuming the home owner originated their FHA loan prior to June 1, 2009, their PIMI payment would be $2,034.45 (apr 4.071): a difference of $200 per month!

If you would like more information about refinancing your FHA insured mortgage for your home located anywhere in Washington, please contact me.  I have been originating FHA insured mortgages for Washington home owners since April 2000 at Mortgage Master Service Corporation and I'm happy to help you.

UPDATE 3/6/2012: INFORMATION ON HUD'S MORTGAGEE LETTER. 

Filed Under: FHA, Mortgage Insurance Tagged With: , ,

FHA Mortgage Insurance set to increase April 2012

February 28, 2012 by Leave a Comment

Yesterday, HUD announced they are going to increase the annual (paid monthly) and upfront mortgage insurance premium on FHA insured mortgages effective on new case numbers obtained April 1, 2012 April 9, 2012 and later.

As of today, the upfront mortgage insurance premium for FHA insured mortgages is 1% of the loan amount. Most borrowers elect to finance this into their FHA loan although it can be paid for as a closing cost instead of including it in the loan amount.  HUD will be increasing the upfront mortgage insurance premium from 1% to 1.75% on April 1, 2012 April 9, 2012.

FHA's annual mortgage insurance (paid monthly) is set to increase by 0.10% for standard FHA loan amounts and will increase an additional 0.35% for "FHA Jumbos will take place on June 1. The additional 0.10% increase is due to "The Temporary Payroll Tax Cut Continuation Act of 2011. HUD has elected to tack the additional 0.25% on the larger loan amounts.

In the greater Seattle area, FHA base loan amounts of $417,000 or lower will see the annual mortgage insurance increase by 0.10%.  Seattle's current high balance (or FHA jumbo) impacts loan amounts of $417,001 to $567,500 and these loans will have increased annual mortgage insurance premiums by 0.35%.

How does this impact an FHA borrower?

Today a Seattle area homebuyer using an FHA insured mortgage at $417,000 with a minimum down payment of 3.5% and excellent credit would have a PIMI principal, interest and mortgage insurance) of $2,346.78 based on a 30 year fixed with a rate of 3.750% (apr 4.544). Effective April 1, this scenario will have a PIMI of $2,395.73 assuming the same rate (apr 4.665).  An increase in total monthly mortgage payment of $48.95 for the same scenario!

Currently a Seattle homebuyer using an FHA mortgage at $567,500 with a minimum down payment of 3.5% and excellent credit would have a PIMI (principal, interest and mortgage insurance) payment of $3,193.76 based on current rates of 3.750% for 30 year fixed rate (apr 4.541). Effective June 1, this high balance FHA loan, assuming the same rate (apr 4.817), the payment increases to $3,377.61! An increase in total monthly mortgage payment of $183.85 for the very same scenario!

NOTE: Rates quoted above are effective as of 2/28/2012 at 4:00 pm. If you would like me to provide you with a mortgage rate quote for your home located in Washington, click here.

If you are considering an FHA insured mortgage, whether it's for purchasing a home, FHA streamlined refinance or other refinance, you'll want to take action before the increased rates take effect. FHA case numbers are issued when you have a bona fide loan application (transaction) with a mortgage originator. I'm happy to help you if your home is located anywhere in Washington state.  UPDATE 3/6/2012: If your FHA mortgage was originated prior to June 1, 2009, you may qualifed for reduced FHA mortgage insurance.

If you would like a rate quote for an FHA mortgage on a home located in Washington, click here.

An official Mortgagee Letter is expected to follow soon. Don't wait!

Click here for FHA Loan Limits in Washington 

UPDATE 3/6/2012: It's official: Here's information about HUD's Mortgagee Letter.

Filed Under: FHA, Mortgage Insurance

Private Mortgage Insurance Options

January 21, 2012 by Leave a Comment

Private mortgage insurance is what lenders may require when a borrower has less than 20% equity in a property. Private mortgage insurance (pmi) protects the lender against default, it does not protect the property owner. 

Private mortgage insurance (pmi) is often something that borrowers do their best to avoid because of the additional cost. However if the 20% down payment (or 15% down payment with a “piggy back” second mortgage) is not possible, a home buyers or home owner who is refinance may opt for pmi or an FHA insured mortgage. Over the past couple years, FHA insured mortgages have become more costly to the point where if a borrower can qualify with pmi, it is probably a more cost effective option. Private mortgage insurance is not only for home purchases, refinances may benefit from pmi considering how low mortgage rates are at the moment.

Many are aware of private mortgage insurance premiums being paid as part of their monthly mortgage payment, however I find that Seattle area home buyers often do not know about the “split premium” option which dramatically reduces the amount paid in a monthly premium.

Let’s compare scenarios based on a sales price of $444,500 with 10% down payment with excellent credit scores of 740 or higher and debt-to-income ratios under 45%.

  • The traditional pmi with the borrower paying monthly in their mortgage payment would be approximately $160 per month (0.48% of the loan amount/12). 
  • A borrower could also opt to pay for the mortgage insurance premium in one lump sum (single premium) and not have it included in their mortgage payment.  Based on this scenario, the cost would be $4,680 (1.17% of the loan amount). A seller can pay for this closing cost or a lender can use rebate pricing to help pay this cost.
  • Another option is the split premium borrower paid mortgage insurance. Similar to an FHA loan, there is an upfront mortgage insurance premium and a reduced monthly mortgage insurance premium. The amount of the upfront premium can vary and the lower it is, the higher the monthly premium will be (and vice versa). For this scenario, if we assume an upfront premium of 1% or $4000, the monthly premium would only be $43.33 (0.13% of the loan amount/12). Just as with the single premium option, the upfront premium may be paid for by the seller as a closing cost or with rebate pricing. 

Private mortgage insurance has risk based pricing that factoring various charactors of the borrowers such as:

  • credit score
  • loan to value
  • program type and term of mortgage
  • occupancy
  • self employed
  • previous bankruptcy
  • location of property

If you have less than 20% down payment saved up to buy your next home or are considering refinancing anywhere in Washington, I’m happy to help.  I’ve been originating mortgages at Mortgage Master Service Corporation for the past 12 years and have been licensed since 2007. If you would you like a FREE rate quote for a home located in Seattle, Redmond, Bellingham or beyond, click here.

Filed Under: Mortgage Insurance Tagged With:
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