The Federal Housing Administration wants to mitigate the impact its new mortgage insurance cancelation policies will have on the status of FHA-insured loans under Regulation Z.
The new mortgage insurance policy that went into effect June 3 raises the cost of newly originated FHA loans (with LTVs above 90%) because the insurance can no longer be canceled.
“FHA recognizes that this change will increase the annual percentage rate on FHA mortgages and may result in mortgages that exceed the higher priced mortgage loan (HPML) standard outlined in Regulation Z,” FHA commissioner Carol Galante said in a note to lenders.
The higher APR is expected to push many FHA-insured mortgages with loan balances below $180,000 into the
“FHA is working to define an FHA QM standard that meets the Dodd-Frank purposes, takes HPMLs into account and addresses the needs of the marketplace for lender and investor certainty,” Galante said in the June 3 note.
As previously reported, FHA will be issuing its own qualified mortgagee that is tailored to the FHA single-family program.
One source noted that HPML provisions in Regulation Z are completely separate from the QM rule issued by the Consumer Financial Protection Bureau. However, FHA is working with the CFPB, which has jurisdiction over Reg. Z and the HPLM provisions.
