According to data provided by the FHA, whether or not the increases in Federal Housing Administration premiums will bring its insurance fund back to good health is dependent on the borrower paying the higher fees for at least seven years of the mortgage.
In August, the Senate approved a bill that would allow the FHA to raise insurance premiums on the mortgages it backs. The changes take effect Oct. 4th.
The upfront premium will be cut to 1% from 2.25%, while the monthly yield was increased to 0.90% from 0.55%. The FHA claims the new policy will add $300 million a month to the insurance fund.
The current FHA book of mortgages has improved from last year and is “considerably better for the 2007 and 2006 books.” But while the underwriting standards for FHA have recently been tightened, those loans behind by 90 days or more has increased 31.5% from a year ago.