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Homeownership

FHA is messing with the MIP policy again and it could cost you big

(REAL ESTATE NEWS) You may have heard the FHA’s recent decision to reduce the annual premiums for MIPS, it sounds good, but what does it really mean on a local level.

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The Federal Housing Administration

In early January, we reported that the Federal Housing Administration’s (FHA) intended to cut annual premiums for Mortgage Insurance Premiums (MIP) from 0.85 percent to a much lower 0.60 percent, a highly anticipated, but highly doubted reduction.

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However, in late January, the newly installed Trump administration worried potential home buyers when the administration froze a number of policy changes set in place by the Obama administration. One of these changes was a 25 basis point decrease MIP.

FHA’s reduction

At first glance, it may not seem like much of a reduction, but as we reported in January, “when a homeowner is part of the FHA mortgage program, they pay MIP at closing (currently a 1.75 percent fee) and then in 12 monthly installments annually, so this reduction will make a wide impact.”

The previous article covered the broader reach and implications of the FHA’s reduction, but the let’s take a look at the local impact of the FHA’s fee freeze.

How it will help home buyers

According the National Association of Realtors’® (NAR®) blog, previous NAR® research estimated that “30,000 to 40,000 home purchases would be lost in 2017 and another 750,000 to 850,000 home buyers would face higher costs.”

These statistics were then re-estimated at the local level using 2015 HMDA figures for purchase mortgages which have created widely varying results.

The MIP in FHA predominate markets

The NAR® found that markets with high shares of purchase mortgages, financed with FHA support will experience the broadest impact of the higher MIP fees. The top 10 markets in terms of FHA shares were in smaller communities in Texas and California, along with small portions of the Southeast and the what the NAR terms the “rust belt” (see map for clarification).

More than 40 percent of home purchases in the top 10 markets were financed with FHA backing.

So naturally, these markets would have received the biggest boost to affordability from the proposed lower monthly payments.

The NAR points out that the regions most likely to feel the impact of the FHA decision, are Laredo (TX), Vineland-Bridgeton (NJ), and MacAllen-Edinburg-Mission (TX).

The other seven areas are: Visalia-Porterville (CA), Madera (CA), Merced (CA), Brownsville-Harlington (TX), Odessa (TX), Yuma (AZ), and Bakersfield (CA), in order of highest to least shares of FHA backings.

National Averages

Nationally, approximately 25.3 percent of mortgages were backed by the FHA in 2015, so a large portion of home buyers will be impacted by the FHA decision.

The NAR® points out however, that because the MIP is figured based on the outstanding mortgage balance, buyers in FHA markets where homes have the highest prices, would not necessarily receive the greatest reduction in annual cost.

For example, markets that are notoriously costly, like California and Hawaii, would have saved approximately $1450 with a FHA loan in 2015.

The new 25 basis point MIP reduction would have a much broader reach, helping those homeowners who need it most.Click To Tweet

What it looks like in your area

Curious about what the 25 basis point system looks like in your area?

The NAR® crafted a chart detailing the potential savings from a 25 basis point reduction in the MIP for over 300 metropolitan areas in the United States, go check it out.

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Jennifer Walpole is a Senior Staff Writer at The American Genius and holds a Master's degree in English from the University of Oklahoma. She is a science fiction fanatic and enjoys writing way more than she should. She dreams of being a screenwriter and seeing her work on the big screen in Hollywood one day.

Homeownership

What are G-fees and why does the gov’t want to raise and take them?

(HOMEOWNERSHIP) Trade groups are banning together to push politicians to not raise G-fees to cover their own ancillary budget, It really would only restrict home buyers.

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As many Americans know, our national budget has a yearly deficit. These deficits have placed many lawmakers into situations that resemble a not so comfortable space in between a rock and a hard place. This results in many discussions over the budget each year, and in some cases, a government shut down until a path is chosen for the country. On March 6, 2020, 33 organizations sent a letter to multiple lawmakers that could have significant impacts on the decisions of the housing market for not only fiscal year 2021 but over 10 years later.

The topic of the letter focused around “g-fees”, or also known as guarantee fees within the “GSEs” (Fannie Mae and Freddie Mac). These g-fees, “cover projected credit losses from borrower defaults over the lifetime of the loans, administrative costs, and a return on capital” according to the Federal Housing Finance Agency.

When these g-fees are hoisted up, like in 2011 to fund a two-month payroll tax relief period, it raises the cost of homeownership nationwide for 10 years. The letter gives the example of a “10 basis points [raised] in g-fees amounts to an additional $5,100 in mortgage payments on the average GSE loan amount of $255,000.” In short, homeowners or those looking to get a mortgage loan would almost instantly see an increase in how much they would pay if g-fees were raised.

Besides laying out the details of how g-fees function, the letter also focused on this cohort’s logical objection for not raising g-fees. These organizations stated they “firmly believe that g-fees should only be used as originally intended: as a critical risk management tool to protect against potential mortgage credit losses.” and not used to fund non-housing related programs and becoming the nation’s “piggy bank”.

If you are a homeowner, or can be impacted by mortgages in any situation, it might be time to start saving or speak up. This is a current issue as the president’s proposed budget for fiscal year 2021 suggests using g-fees again to help fund loses in the budget.

These are the organizations who are asking for this reconsideration through their letter:

American Bankers Association
American Escrow Association
American Land Title Association
Asian Real Estate Association of America
Center for Responsible Lending
Community Associations Institute
Council for Affordable and Rural Housing
Credit Union National Association
District of Columbia Association of REALTORS
Enterprise Community Partners, Inc.
Housing Policy Council
Independent Community Bankers of America
Institute of Real Estate Management
Leading Builders of America
Manufactured Housing Institute
Mortgage Bankers Association
National Apartment Association
National Association of Federally-Insured Credit Unions
National Association of Home Builders
National Association of Housing Cooperatives
National Association of Real Estate Brokers (NAREB)
National Association of REALTORS®
National Community Reinvestment Coalition (NCRC)
National Community Stabilization Trust
National Council of State Housing Agencies
National Fair Housing Alliance
National Housing Conference
National Housing Resource Center
National Multifamily Housing Council
National NeighborWorks Association
The Community Mortgage Lenders of America
The Realty Alliance U.S. Mortgage Insurers

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Homeownership

The Federal Housing Finance Agency is dropping serious cash to help buyers

(HOMEOWNERSHIP) What would you do with half a billion dollars? The Federal Housing Finance Agency is putting it towards affordable housing.

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Last year, ATTOM Data Solutions, released a study showing that wages in about 80% of the United States can’t keep up with the rising cost of buying a home. In fact, for about 59% of the areas studied, it was cheaper to rent three bedroom housing, rather than buy.

As such, it should come as no surprise that the number of low-income individuals surpasses the amount of affordable housing available. “Is it a housing problem, or is it an income problem?” says Chris Herbert, managing director of Joint Center for Housing Studies at Harvard, “I would say it is both.”

The thing is, a lack of affordable housing hurts everyone. Would-be homeowners are left renting and forced out of certain areas (and opportunities), while rising prices can also make it more difficult for people to sell their homes. Yikes.

Luckily, it’s not all bad news, thanks to the Federal Housing Finance Agency, which is allocating “$502.2 million to the National Housing Trust Fund and the Capital Magnet Fund.”

Don’t get me wrong, this isn’t going to fix the systemic problems that have created this disparity between income and housing prices, but it’s definitely a nice start. For instance, the National Housing Trust Fund commits at least 90% of its funding to creating and maintaining affordable housing, with the other 10% going to help first-time homeowners take on some of the unexpected costs of homeownership.

Meanwhile, the Capital Magnet Grant Fund focuses on providing grants to help revitalize low-income communities. They’ve created over 13,000 affordable homes so far, though only about 12% of these homes are for homeownership – most are rentals. Still, not bad when it comes to helping low-income citizens afford the rising prices of living.

Both groups have great track records, so it will be exciting to see how they utilize this donation of over half a billion dollars. The president of the National Association of Realtors®, Vince Malta, also commended the move.

“Initiatives that address the root of the nation’s housing affordability crisis must take center stage in discussions surrounding the future of housing finance,” Malta explained, “NAR looks forward to leading this discussion and working with the FHFA (Federal Housing Finance Agency) to ensure all responsible, credit-worthy individuals can achieve the American Dream of homeownership.”

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Homeownership

How to inform clients about scams that continue to victimize homebuyers

(HOMEOWNERSHIP) Real estate scams continue to victimize people, but Realtors are in a position to better protect homebuyers. Here are some tips.

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Despite warning after warning and news story after news story, homebuyers keep getting their money stolen in real estate wire transfer schemes. Some blame the mortgage and real estate industries for not doing enough to educate and protect their clients. Others say the people committing these crimes are getting more and more sophisticated. No matter who’s to blame, there’s no arguing that this crime is on the rise.

What exactly do these real estate scams look like? These criminals usually hack into a business’s emails, often a title company, and get all the pertinent information they need. They then steal and copy that company’s letterhead, and the email addresses, signature blocks and any other relevant information they will need to fool the homebuyer. The homebuyer then gets an email that appears to be from the title company, asking them to wire money, often tens or sometimes hundreds of thousands of dollars.

So, you’re probably wondering right now: What can I do? You want to know how to warn and protect your clients and keep your reputation intact (and avoid costly lawsuits). The following safeguarding tips can help keep cash out of cyberthieves’ hands:

1. Pick up the phone. If you’re closing on a home and receive an email with instructions on how to transfer money to your closing company or lender, take a few minutes to call your agent or broker to make sure it’s legit. Yes, this might be a bit annoying, but not as annoying as losing thousands of dollars in an email scam.

2. Be aware. These scammers usually send emails that look like the real thing. If you’re a homebuyer, look for weirdly timed emails (sent in the middle of the night) or spelling and punctuation errors. Is there a sense of urgency to the email?

3. Educate your clients. If you’re a real estate professional, make sure your clients know about this scheme. Not everyone is aware they could be a target (which is why it keeps happening). Set up a specific passcode for each client.

4. Consider using BuyerDocs and asking your title company to use this technology for all of their transactions.. What’s BuyerDocs, you ask? This tech startup provides secure document delivery for closing companies and homebuyers. The company says it has protected more than $5 billion in wire transfers in 2018 and works with big and small businesses across the country.

Scams will never be eradicated, but it is part of your job to know the current scams and how to protect transactions against shady folks.

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