FHA Changes

Congress was busy in the last week related to FHA. Senators Begich (D-AK) and Brown (D-OH) introduced S. 3704, the FHA Reform Act of 2010. This bill implements changes necessary to help FHA remain strong and rebuild its capital reserves. The bill provides a number of taxpayer protection measures, while ensuring that the FHA program remains affordable and available to responsible homebuyers. A companion measure (HR 5072) passed the House in June. NAR strongly supports this bill to continue FHA’s mission of providing responsible borrowers with affordable mortgage financing.

The Senate also passed a measure to increase FHA’s annual premiums. FHA needs to increase premiums to restore their capital reserves fund that had fallen to .55% from the required 2%. The House passed similar legislation the previous week, and President Obama is expected to sign the bill shortly. FHA has published a letter, announcing their intent to implement the new premiums for case numbers issued after September 7, 2010. They will lower the upfront premium to 1%, and increase the annual premium to .85-.90%, depending on LTV. The full letter is available on HUD’s website.

Full Letter Available on HUD’s Website

Jerome Nagy 202-383-1233, Megan Booth 202-383-1222