The Federal Housing Administration section of a massive housing bill is causing heartburn for lenders because they will have to abandon a newly implemented risk-based pricing structure.
The Department of Housing and Urban Development mandated implementation of the RBP structure by July 14, but the housing bill imposes a 12-month moratorium on risk-based pricing starting Oct. 1.
HUD also has to convert back to charging a standard upfront mortgage insurance premium for all borrowers. "Now, FHA will be required to increase prices on all customers," HUD Secretary Steven Preston said. And it will require HUD to eliminate the newly expanded FHA Secure program that relies on RBP, he added. Before July 14, the standard upfront premium was 1.5%. Some expect the FHA to raise the premium to 2%, but HUD could raise it up to 3% under a provision of the housing bill.
What a mess. Lenders have spend tons of money to get these new guidelines implimented by the July 14th date! Now it looks like the borrower will pay the price. I just don't think it is fair to have to pay extra for other borrowers who may not have as high of credit score and less down payment!
This blog by:
Team Newington
Sacramento Mortgage Planners
(916) 687-6868
www.SuperiorLoanTeam.com
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I think you're missing the point. Risk based pricing is exactly what it says. No one ever accused the government of being good at running a business but this finally makes sense. Good credit deserves a reward. Poor credit needs to pay a little more. An overall increase will allow the program to continue to help people buy homes. It's about time the government got smart!
Okay so I am now officially confused. Looks like I better do some reading up on my own on this issue. Veronica
Someone has to fund the MI and pay for all the new perks passed
Ken: I am all for and do get the point of risk based pricing. What stinks is this new bill will override this new rule for 12 months and may mean everyone across the board may be getting an increase. Thanks for your post!