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FHA Raises Its Premiums to Insure Repayment of Mortgages

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The Federal Housing Administration, a U.S. agency that is rapidly shouldering more of the risk on home loans, raised the premiums it charges for insuring that mortgages will be repaid.

In a posting on its Web site Tuesday, the FHA said the upfront premiums charged to most borrowers will be 1.75% of the loan amount, effective Oct. 1. That is up from the 1.5% that was in effect until July 14, when the FHA adopted a "risk-based" pricing system that created a range of charges depending on borrowers' credit scores and the amount of the down payment or equity they owned in the homes. In late July, Congress approved a housing bill that included a provision requiring the FHA to revert to a standard premium at least until Oct. 1, 2009.

 

On a $300,000 loan, the new upfront premium works out to $5,250, up from $4,500. The annual premiums paid by borrowers would remain at 0.50% to 0.55% of the loan balance.

The FHA may well need more income to cope with the payouts it will have to make to lenders and loan investors in coming years. At a time when house prices generally are falling, the share of new mortgages insured by the FHA has soared to 23% in July from a low of 1.8% in 2006, according to Inside Mortgage Finance, a trade publication. Guy Cecala, publisher of Inside Mortgage Finance, said the FHA's share could reach 30% by year end.

 

The FHA is taking a far bigger share of the market because investors last year began shying away from buying mortgage securities that don't have backing from a federal agency or government-sponsored mortgage investors Fannie Mae and Freddie Mac. More recently, Fannie and Freddie have become more cautious about buying or guaranteeing mortgages because heavy losses have depleted their capital. Borrowers can get FHA-insured loans with down payments as small as about 3%.

 

The FHA had assets of $19 billion in its reserves for single-family mortgages as of June 30. Some analysts have warned that the agency might need to ask Congress for money to rebuild its reserves if defaults continue to rise. Congress has given the FHA a prime role in backing new, more affordable loans for people who are struggling with their current mortgages. Those refinances are likely to be risky because borrowers who are rescued once often fall behind again later

 

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By JAMES R. HAGERT

 

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We can help you stop foreclosure with a loan modification in the following states:

If you need help understanding your option of taking advantage of the home loan modification process, the help is available to you everywhere. The process is quite tricky and it is highly recommended that you do indeed seek legal advice before signing on the dotted line, in order receive the most efficient and cost-effective modification to your mortgage payment.

Where do I get Advice
There is advice all over the web on how to receive a loan modification; some of this advice is quite helpful, while some is quite dreadful. There is also the opportunity to hire a professional service that will help you go through the paperwork and work with the lender to help you get all the benefits that you deserve, due to a hardship. Loan modification is a process that must be understood completely and thoroughly. This article can actually offer you an insight on the process of loan modification and tips that will better help you as a homeowner save your home from the risk of a foreclosure.

Loan Modification Advice
First and foremost, it is important to determine if you are eligible for a loan modification. This requires writing a letter of hardship explaining to the lender what exactly the reason is for your late payments and the fact that you are unable to pay your mortgage. Doing a loan modification on your own requires more than just advice. Becoming educated about the process is more important. This is perhaps a good reason to hire a professional loan modification company to take part in the process. They will handle everything for you, while educating you in the progression. There is a fee charged for hiring these companies, but in turn your mortgage payment can be lowered quite a bit and professionals can even find things in your original loan papers that may prove that the lender may have broken the law during your original mortgage signing.

If you do choose to take the big leap of the loan modification process on your own, you must first contact the lender and they will lead you to the correct department, normally the loss mitigation department. You may not want to directly say that you are in the process foreclosure. We do not want the lender to think your situation is not worth their time before hearing you out. Always document anything relating to the loan modification process, every phone call and any other information you may receive during the process must be documented. Always discuss every option available with your lender, so that you may come up with the best alternative for you. It is true you will save money going directly through your lender and let’s face it, you are struggling already trying to make your payments, but professional assistance can help immensely.

No matter what direction you decide to take, loan modification will be what determines the amount of time you have in your home. If you are eligible you should act as soon as possible.

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