Financial Update by Maurice Soussé

Interest rates bumped up a bit this week. It is hard to say which way rates will go as we encounter a negative 2% real Gross Domestic Product. The FED came out yesterday and reaffirmed their commitment to purchase $40 billion per month in Mortgage Backed Securities. This helps to keep interest rates down, which benefits the economy through consumers ability to spend more money on durable goods; less on their mortgage.

On a very important note, FHA has made some major changes to their policies in order to better manage risk and strengthen the MMI Fund:

1) The release also announces that FHA will increase its annual mortgage insurance premium for most new mortgages by 10 basis points. FHA will increase premiums on jumbo mortgages by five basis points. Premium increases will exclude certain streamline refinance transactions. FHA will also require most FHA borrowers to continue paying premiums for the life of the mortgage loan not just until the principal balance reaches 78% the original principal balance.

2) FHA will now require lenders to manually underwrite loans for which borrowers have a credit score below 620 and a total debt to income ratio greater than 43%. Documentation of compensating factors will be required.

3) The Release announces a proposed increase in down payment for mortgages with an original principal balance above $625,500. The increase will be to 5% from its current level of 3.5%.

These are some significant changes to the FHA program.

I like this week’s quote from Joel Osteen who said “Choosing to be positive and having a grateful attitude is going to determine how you’re going to live your life.”

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