FHA Loans Could Undergo Changes

With its extremely low down payment, the Federal Housing Agency (FHA) loan is the primary method for financing for homebuyers across the country. According to a recent Wall Street Journal article, the FHA loan will be undergoing some changes that could have a major effect on affordability.

“About 56% of mortgages for a home purchase were FHA-insured in 2009, up from 6% in 2007,” reported the WSJ. According to the Mortgage Bankers Association, up to 80% of those who received an FHA loan were first-time homebuyers.

Currently these loans can be for up to  $729,750 in high-cost markets, but the Obama administration is recommending that these high limits expire in October. $625,500 would be the new high limit.

More changes to the FHA program are seen on the horizon. “On April 18, the annual mortgage-insurance premium on new FHA loans is set to rise by a quarter of a percentage point on 30- and 15-year mortgages,” states the article. In addition, some predict that the standard 3.5% down payment could soon rise to 5%.

What do you think about these expected changes to the program and the impact it might have on the market?

Life Without Freddie and Fannie?

What would happen if loan giants Freddie Mac and Fannie Mae were shut down? A recent New York Times article explains that if the government eventually shuts down these companies, the 30-year fixed-rate mortgage loan could be a thing of the past.

Homeownership as we know it could change drastically, with the fixed-rate loans at risk for extra fees and high rate increases for those in urban and rural areas.

“Lenders could charge fees for popular features now taken for granted, like the ability to “lock in” an interest rate weeks or months before taking out a loan,” according to the article.

Fannie Mae and Freddie Mac carry 90% of new mortgage loans post-recession as many lenders can’t afford to make loans that aren’t government insured.  The 30-year loan has been the popular option since it was introduced in 1954 by an act of Congress, and most have been issued only with government support.

Read more about the possible outcome of Fannie Mae and Freddie Mac being shut down and what would mean for mortgage rates here.

Treasury Invites Taxpayers to Get Refunds by Debit Card

The U.S. Treasury wants to quit writing paper checks. At the same time, it wants to give taxpayers more choices.

Its latest effort consists of a pilot program to deliver tax refunds through prepaid debit cards. About 600,000 taxpayers earning $35,000 a year or less have received letters inviting them to activate a debit card that can receive direct deposits.

An estimated nine million households, about one in every 12, don’t have bank accounts. By activating the debit card for a tax refund, they wouldn’t have to pay a check-cashing fee, and the government would save the cost of producing a check.

Each tax refund check costs the government about $1, including the cost of processing roughly 600,000 claims each year for missing checks. Payments by direct deposit cost the government about 10 cents.

The pilot program will provide consumers with a debit card that can be used, not just for receiving refunds, but also for shopping with many features of a checking account.

Deputy Secretary of the Treasury Neal Wolin, quoted by Bankrate.com, says the debit card “can be used for everyday financial transactions, such as receiving wages by direct deposit, withdrawing cash, making purchases, paying bills and building savings safely, giving users more control over their financial futures.”

Half of the 600,000 offers from the Treasury test program will carry a monthly fee of $4.50. The rest will be free. The different approaches will allow Treasury to determine which is more likely to lead consumers to sign up for the card.