FHA is raising it's annual MIP. So this sounds like a good thing, right?

FHA is raising it's annual mortgage insurance premium by .25 basis points to 1.15%. This will raise monthly payments on new loans by approximately $21 per $100,000 borrowed. Not a lot in the grand scheme of things, and it is being presented as critical to keep FHA cash reserves solvent in the wake of rising foreclosures.

The beef I have with this is twofold:

First, FHA has always charged both an Up Front Mortgage Insurance Premium (UFMIP is collected at close of escrow and generally added to the loan amount), and an annual Mortgage Insurance Premium (generally paid monthly as part of the mortgage payment). So for all these years FHA has been generating this cash flow - where did it all go?

Second, according to the new FHA Commissioner David Sterns, these looming foreclosures are the result of what he told a House panel in October were the result of loans generated in 2007 and 2008 by "rogue players on the margin" who immediately migrated to the world of FHA lending after the subprime mortgage market collapsed. Well, FHA loans have always been "full doc" loans, so if these "rogue players" were writing bad loans they were doing it fraudulently and should be made to buy these loans back, not leave FHA or the US taxpayers on the hook for them.

Sure, people should be required to pay a premium for the additional risk involved in putting very little down on a mortgage, but this smacks to me of just another way that the little guy is being squeezed.



Full HUD press release at:
http://portal.hud.gov/hudportal/HUD?src=/press/press_releases_media_advisories/2011/HUDNo.11-013

Washington Post article on FHA foreclosure issues:
http://www.washingtonpost.com/wp-dyn/content/article/2010/02/01/AR2010020103527.html