GSEs (Fannie/Freddie),FHA&HUD

New Premiums

Posted on Thursday, February 17, 2011

"As part of ongoing efforts to strengthen the FHA capital reserves," and to help
> push private money back into mortgages, the FHA came out with a new premium structure
> for FHA-insured mortgage loans increasing its annual mortgage insurance premium
> (MIP) by a quarter of a percentage point (.25) on all 30- and 15-year loans starting
> in mid-April. (The upfront MIP will remain unchanged at 1.0 percent.) The increase
> adds $30 to the average borrower's payment and in total is estimated to add $3 billion
> annually to the FHA's Mutual Mortgage Insurance Fund. It is the second increase
> since October.
> From an investor's viewpoint, any investor holding Ginnie Mae securities just became
> much more comfortable with their holdings and with the odds of FHA-to-FHA refinancing
> going down. Those familiar with FHA loans realize that before October a 95% LTV
> 30-yr loan paid a 225 basis points up-front MIP with a 50 bps annual MIP. Now,
> that loan pays 100 bps up-front -- but 110 bps annually. Investors believe that
> this change, given current rates, effectively removes any 5% and 5.5% FHA loans
> from being refinanced into new FHA loans.
> Higher rates combined with more investor changes are not always a good thing. Bank
> of America updated its Conforming, Government, and Non-conforming product lines.
> Affiliated Mortgage tweaked its Conforming Fixed/ARMS product lines, and Wells
> Fargo updated its Non-Conforming product lines.
> Wells Fargo's wholesale group got the word out to its brokers about some FHA transactions
> that are impacted by agency changes. (HECM's and reverse mortgages were not impacted.)
> Fifth Third announced a pricing adjustment - a bump for its "FX20 HASP/DU Refi Plus"
> program starting today. The hit is now 1.5 points for the Freddie Mac HASP/Open
> Access and Fannie Mae DU Refi Plus programs when the LTV is greater than 105%.

> PHH announced that starting Friday the recommended minimum credit score will be
> increased to 740 for purchase and rate and term refinance transactions with LTV
> between 95.01 and 97.00% (applicable when either PHH or the correspondent is ordering
> the MI commitment). It also reminded its clients of the amount of interest that
> can be used in the "Maximum Mortgage Calculation for Conventional and FHA No Cash
> Out and Streamline Refinance transactions" (it cannot include more than 30 days'
> worth of interest, etc.). PHH's recent updates also addressed the validity of credit
> scores ("must be established based on a sufficient amount of trade lines"), MI requirements
> for loans receiving an AUS Score of Approve or Accept from DU or LP ("the borrower's
> credit reputation is deemed to be acceptable for credit that is evaluated on the
> credit report. However if verification by any other means, such as directly from
> a creditor or a credit supplement is needed...and so forth.) PHH also stated that
> it has begun ordering non-refundable mortgage insurance premiums from its MI providers,
> and changed its policy on USDA Idaho loans regarding non-qualifying spouses. As
> always, clients are advised to read the bulletins thoroughly.

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