Talking Points
- The Federal Housing Administration (FHA), which insures loans for borrowers with low down payments, announced last week that it will exhaust its capital reserves and face a deficit of $13.5 billion, leaving some to wonder how this will impact borrowers and sellers.
- According to some analyses, the agency’s insolvency likely won’t have a large impact on consumers.
- The FHA plans to raise its annual mortgage insurance premiums from 1.25 percent to 1.35 percent early next year, and revoke new borrowers’ ability to cancel their premiums once their loan balances hit the 78 percent loan-to-value level.
- Additionally, the agency plans to expand pre-purchase counseling efforts for applicants with low credit scores and minimal down payments, and step up efforts to promote short sales to seriously delinquent owners who are likely headed for foreclosure.
- Combined, the changes do not appear to be a big deal for most buyers who opt for FHA loans.