March 15, 2023 | Written by Michael Famiglietti
In an effort to bolster mortgage loan applications, The Federal Housing Administration (FHA) announced it will reduce mortgage insurance premiums by 30 basis points in March. The move is expected to help more borrowers qualify for loans as the industry continues to see record low applications. Higher interest rates and low inventory nationwide have likely caused the recent drop, and more borrowers may be able to qualify under the new premiums.
Most commonly, for loans less than or equal to $726,200 with a Loan-to-Value (LTV) greater than 95%, the previous .85 percent premium will be reduced to .55 percent. Other premiums differ based on loan amount, term and LTV. This will reduce the amount of mortgage insurance the borrower pays per year. According to the Department of Housing and Urban Development (HUD), this change will benefit about 850,000 borrowers over the next year. The new premiums go into effect March 20.
In its announcement, HUD reported the reduction will further benefit first-time homebuyers and others who have had difficulty qualifying for a mortgage. FHA loans have historically helped those with lower down payments and income to qualify. While many prospective buyers may finally find the affordable option they need, others may see an incentive to defraud lenders. With recent decreases in staff, lenders may need help in ensuring the documentation used to qualify for these loans is accurate.
Whether it’s in employment, income, assets, undisclosed liabilities or occupancy, misrepresentations may increase with a surge in loan applications. Those who prey on vulnerable borrowers may also attempt to use them to obtain loans for fraudulent purposes. Lenders and reviewers should complete a robust and timely review of all suspicious representations to ensure quality loans are funded.
Frasco provides comprehensive and customizable reviews of these representations. We authenticate employment through public records, document review and field investigators, who can interview applicants and employers throughout the United States. We also complete timely asset reverification through our comprehensive database and automated services, and discover occupancy schemes with interviews, field visits and public record research.
These reviews can supplement a lender’s in-house quality control department, as allowed by FHA. As lenders are required to review a set amount of their FHA loans per year, the Frasco risk mitigation team can help an existing quality control team with verifications and bigger investigations. A timely and tailored review can help satisfy program guidelines and meet pre-funding or post-funding timetables.
For more information:
Email Michael Famiglietti, Director of Mortgage Risk Mitigation
Schedule a call with Michael Famiglietti, Director of Mortgage Risk Mitigation