There was an informative report over at Housing Wire on the recommendations that recently came out of a House finance committee regarding FHA mortgages. Here are some excerpts:
The House Financial Services Committee approved a bill to increase capital reserves in the Federal Housing Administration (FHA) and reduce risks to its insurance fund. The bill will now move to the House floor for debate.
The bill would amend the National Housing Act by increasing the cap of annual premium payments collected by the FHA from 0.50% to 1.5%. It would also hold approved lenders accountable for the FHA loans they write. Under the new bill, if the FHA pays out a claim on a mortgage it finds did not meet its underwriting standards or detects fraud involved with the origination of the loan, it could require that lender to pay reparations for the loss to the insurance fund.
The bill also widens the authority of the FHA to terminate its approval of lenders to write its insured mortgages. If the FHA finds a lender has an excessive rate of early defaults and claims, it could remove the lender approval for any area in the country not just within its region.
Basically they are talking about tripling the monthly PMI fees for FHA loans going forward. I doubt the bill will get much traction if the goal is to keep FHA loans popular. Tripling FHA PMI fees would make FHA loans a very undesirable option for borrowers — especially when combined with the other fee increases that have been implemented recently.
Nevertheless, if you are interested in an FHA loan it may be wise to contact us sooner rather than later because even if this bill does not become law FHA loan could become more expensive this year one way or another.