US Government: Mortgage Insurance on Federal FHA Loans to Become Permanent

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The Department of Housing and Urban Development (HUD) announced on January 31st that mortgage insurance premiums would become permanent effective June 3rd, 2013. Broadview Mortgage is a California based mortgage bank.

The change in guidelines...puts a damper on an already struggling housing market

The United States Department of Housing and Urban Development (HUD) announced in a Mortgagee Letter that mortgage insurance on FHA loans will not only be increasing, but effective June 3rd, 2013 they will become permanent.

FHA mortgages carry a premium for being insured by the federal government. In the event of a default, the federal government would pay the remainder amount of the loan to the owner of the mortgage.

"Initially, these loans were meant to be affordable. The change in guidelines makes them less affordable and puts a damper on an already struggling housing market," says Chris Apodaca, a licensed mortgage banker for Broadview Mortgage Corporation.

"At this point, it's them [the federal government] trying to hedge their risks. Interestingly enough, FHA loans were created for people who were already high risk. We're talking about recent college graduates, 20 somethings starting a new family, or newly naturalized citizens trying to have their part of the American Dream. This will turn their 3 bed, 2 bath into a 1 bed, 1 bath with no yard." says Apodaca.

According to current FHA guidelines, the monthly mortgage insurance premium can be removed after a loan has matured five years and the property has 20% equity.

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Chris Apodaca
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