Lower Fees for Previous FHA Mortgage-Holders

President Obama’s newest plan unveiled to ease some of the burden on homeowners seems like a two-sided coin. Still, there are benefits to as many as two to three million current mortgage holders.

Administration Encourages Refinances Fee Reduction on FHA Mortgages

Under a plan that was revealed recently, the FHA will be reducing the amount required up-front to obtain mortgage insurance from 1.15% to 0.55%, adding up to reasonably significant annual savings for homeowners. In addition to the up-front fee reduction, monthly mortgage insurance premiums will also be reduced by as much as ten times.

Though some say that Obama has fallen short of assisting homeowners and future borrowers to gain control in light of current housing market woes, he says that the program is “like another tax cut in people’s pockets.” The savings are two-fold. Not only do homeowners save PMI fees going into a refinance but the current low interest rates will save borrowers even more money.

More Out of Pocket Expense for New FHA Borrowers Expected

On the flip side, also recently announced are increased mortgage insurance fees, for both up-front and monthly premiums, applicable to all new FHA borrowers. The increases will take effect beginning April 1, 2012 and they are being instituted to make up for the agency’s dwindling Mutual Mortgage Insurance Fund. Congress has recently announced the FHA must have at least 2% reserves in the fund and the recently increased fees will serve to replenish those reserves.

In terms of additional costs, the increased fees amount to about $635 annually and over $8 per month on a mortgage of $100,000.