The FHA has been slowly going broke ever since the housing bubble burst in 2007. After sub-prime lending went extinct in 2007 the alternative for many borrowers and lenders was FHA loans. FHA loans became popular because they require little money down for purchases, they usually have low interest rates, and they allow for lower credit scores than conventional loans. The problem for the FHA was that housing prices continued to drop for several years after the FHA boom in 2007. Many of the loans the FHA had insured ended up defaulting and the FHA has been on the hook to pay the lenders off. That has led to a depletion of the FHA insurance funds.
To raise more money, the FHA has raised their mortgage insurance fees numerous times in the last few years. The next scheduled change will make the monthly FHA mortgage insurance fees last for the life of the loan rather than for the minimum 5 years that is in place now. This change in policy means that anyone looking to refinance their current FHA loan to the current all time low rates should get the process started in May to avoid the upcoming mortgage insurance change.
Borrowers with FHA loans should contact us today to get an estimate on an FHA streamline. Rates on 30 year fixed FHA streamlines have been in the mid to low 3’s in recent weeks. And while FHA streamlines will still exist after the coming change on June 3rd, the FHA rules are less expensive right now than they will be next month.