FHA Wants to Raise Annual Premium to 0.85%

The Federal Housing Administration is seeking congressional permission to raise the annual premium on FHA-single-family loans to 0.85%, up from the current 0.55% statutory limit, according to the President's fiscal year 2011 budget proposal. "If granted this statutory flexibility, FHA will lower the upfront premium to 1% and increase the annual premium from 0.50% to 0.85%," the budget document says. The discussion of FHA issues in the budget documents also indicates FHA might charge a 0.90% annual premium on low downpayment mortgages. FHA is in the process of raising the upfront premium to 2.25% this spring with the caveat that it will lower the upfront charge once Congress approves the increase in the annual premium. The budget documents also show that the FHA reverse mortgage program will need a $250 million congressional appropriation in FY 2011 to break even. The administration is proposing changes to the Home Equity Mortgage Conversion program that will raise premiums and "slightly lower loan limits."