Friday, January 16, 2015

Federal Housing Administration (FHA) will reduce annual mortgage insurance premiums by 0.5 percentage point


Press release at Whitehouse.gov.

The Federal Housing Administration (FHA) will reduce annual mortgage insurance premiums by 0.5 percentage point from 1.35 percent to 0.85 percent. 
For the typical first-time homebuyer, this reduction will translate into a $900 reduction in their annual mortgage payment. 
Existing homeowners who refinance into an FHA mortgage will see similar reductions to their mortgage payments as well. In total, this action will help millions of families save billions of dollars in mortgage payments in the coming years,
This new policy, along with the Fed stopping the QE and FINALLY letting rates fall (see Detroit Dan's piece below...), is spurring a big uptick in re-fi activity.

Report on HUGE increases in mortgage applications here at WSJ.
Mortgage applications rose a seasonally adjusted 49% in the week ended Jan. 9 from the previous week and 30% from a year ago, according to data from the Mortgage Bankers Association. 
Application volume touched its highest level since August 2013, with most of the increase driven by borrowers seeking to refinance.
As rates continue to fall over the next few months this trend will accelerate.

So homeowners will be paying the government much less interest as they lock in what will probably become the all time lowest mortgage rates and now they also save a half point on what they are currently paying for mortgage insurance.

All of this is in effect a major tax cut being implemented for most households with mortgages.

BULLISH.


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