FHA is lowering its mortgage insurance premiums to help borrowers refinance into lower interest rates. Additional help to military who have been wrongly foreclosed on or denied the opportunity to refinance as well, as announced by President Obama earlier this week
FHA is reducing its up-front premium to .01 percent, from 1 percent, for streamlined refinancing of loans originated prior to June 1, 2009, and cutting the annual fee for these refinancing in half, to .55 percent, from 1.15 percent.
FHA says that the reduction in fees could save homeowners approximately $1,000 a year in addition to the saving from the refinance.
“That would make refinancing even more attractive to more families. It’s like another tax cut that will put more money in people’s pockets. We’re going to do this on our own. We don’t need congressional authorization to do it.”
A typical FHA borrower with $175,000 outstanding on a mortgage would be able to reduce the monthly payments to $915 a month, assuming a new mortgage at 4 percent. Without the fee reduction, the monthly payment after a refi would be $1,010 a month.
The fee cuts begin June 11.
Under the assistance to home owners in the military, the administration says it will take the following five steps:
1. Conduct a review of every service member foreclosed upon since 2006 and provide any who were wrongly foreclosed upon with compensation equal to a minimum of lost equity, plus interest and $116,785;
2. Refund to service members’ money lost because they were wrongfully denied the opportunity to reduce their mortgage payments through lower interest rates;
3. Provide relief for service members who are forced to sell their homes for less than the amount they owe on their mortgage due to a permanent change in station;
4. Pay $10 million dollars into the Veterans Affairs fund that guarantees loans on favorable terms for veterans; and
5. Extend certain foreclosure protections afforded under the Service Member Civil Relief Act to service members serving in harm’s way.
Read a transcript of the President press conference yesterday.
Read the current release for more information on the Proposal