Goodbye Risk-Based Pricingby Tim Manni
Hello higher upfront mortgage insurance premiums on all FHA single-family loans beginning October 1. Despite the president’s support for risked-based pricing (RBP), the recent version of the housing rescue bill signed into law did away with RBP because opponents argued that the government was essentially charging the highest premiums to the poorest and weakest borrowers.
According to National Mortgage News, the 1.5% mortgage insurance premium is expected to be raised by at least .25%. The boost in premium is a clear acknowledgment that new loans may still present some risk. Since the FHA will no longer be able to assess the reliability of their borrowers, the higher premium will help ensure that the program remains solvent.