FHA mortgage changes could benefit borrowers
FHA financing of home purchases has provided the key to homeownership for many consumers over the years, particularly for first-time buyers - that is, until FHA started a series of cost increases.
Responding to pressure from housing groups, costs for an FHA mortgage are being cut, making the loans affordable for many more prospective buyers.
The Federal Housing Administration is reducing its annual mortgage insurance premiums by 0.5 percentage points in a move "to expand responsible lending to creditworthy borrowers," according to a White House statement.
The FHA also said it would take added steps over the next few months to "cut red tape and clarify lending standards" in reducing mortgage costs for hundreds of thousands of creditworthy borrowers, according to the White House. The move comes after several calls from industry trade groups, associations and members of Congress urging the agency to lower its insurance premiums, which were increasingly blamed for sidelining thousands of would-be buyers. FHA-backed loans allow buyers to put down as little as 3.5 percent of the purchase price, and they continue to be a major financing resource for first-time buyers.
FHA's mortgage insurance premiums will be reduced from 1.35 percent to 0.85 percent. The reduction in premiums on mortgages could save an average borrower $1,000 a year on a $200,000 loan, says Mark Zandi, chief economist at Moody's Analytics, the National Association of Realtors reported.
"We are optimistic that more affordable FHA loans will have a positive impact on first-time buyers who have been entering the market at a lower-than-normal rate," NAR President Chris Polychron said.
In 2013, the FHA required a $1.7 billion bailout from the government after suffering losses from a high number of loan defaults in the aftermath of the financial crisis. Since 2008, FHA has increased its annual premiums for FHA borrowers five times.
NAR estimated that nearly 400,000 creditworthy borrowers were priced out of the housing market in 2013 because of the higher costs in FHA insurance premiums.
Q. What new innovations in homes will we see this year?
A. Many conventional homes will become smart homes in 2015. An increasing number of companies are debuting appliances, lights, temperature-controls and other home systems that use wireless technology - like apps for smartphones and tablets - to permit remote operation and even allow users to add additional features, it was reported by the National Association of Realtors. Some companies are promoting devices with a heavy emphasis on the growing trend known as "the Internet of things." This includes mobile apps and an array of related devices that control and monitor home functions, such as door locks, heating systems and television sets.
Q. Are many home mortgages still upside-down?
A. Yes, but their numbers are declining.
As home values rise and borrowers continue to gain equity, CoreLogic's analysis indicates that nearly 5.1 million properties are still upside-down on their mortgage. That figure represents about 10.3 percent of all residential properties with a mortgage compared to about 13.3 percent the year prior.
Q. Where are home prices rising most rapidly?
A. Home values have risen fastest in markets where institutional buyers bought up scores of foreclosed homes and then rented them out, it was reported by National Mortgage News.
But these investors have largely curtailed their buying and may even be ready to start selling off more properties to profit from the run-up in home prices. That could be good news for first-time buyers.
Q. Are commercial mortgages expected to increase this year?
A. A new survey by the Mortgage Bankers Association points to a significant increase this year. Commercial and multifamily mortgage lending is expected to increase in 2015, as lenders' appetites to place new loans remains very strong and borrowers' appetites to borrow increase, according to MBA's survey of the top commercial and multifamily mortgage origination firms.
A full 100 percent of the top firms expect originations to increase in 2015, with 68 percent expecting an increase of 5 percent or more. Almost three quarters (72 percent) expect their own firm's originations to increase by 5 percent or more.
• Email Jim Woodward at storyjim@aol.com.
© Creators 2015