The FHA recently proposed reducing the UFMIP while increasing the annual premium that is paid monthly. Their stated intention is to bolster their insurance reserve fund. Um, not so fast….
Before even running the numbers, cutting the upfront MIP which is arguably when they need the money the most, wouldn’t seem to make sense. So when in doubt, I always fire up a new spreadsheet. Not surprisingly, my suspicions were confirmed. Want to see exactly how bad it could get? Here’s a very short video to demonstrate how it works out.
If you’d like a copy of the spreadsheet shown in the video for your own use or to engage your clients and partners, you can download it here.
Or, for you conspiracy theorists, was this all a well concocted plan to run up the stock prices of the regular PMI companies (check the recent price action)? When you boil it all down, that’s about the only beneficial thing for at least somebody that’s coming out of this…..
My guess is that this is just another well intentioned but very poorly thought out plan by yet another government agency that fails to seek advice from those that are perhaps in the best position to offer it. If this bothers you, please check out www.immaag.com This is run by Bill Kidwell. Bill is an esteemed broker from CO and is leading the fight against this and other proposals which are only harming the public and making it more difficult and expensive for all involved.
In the meantime, if you have any FHA/fence sitters waiting for things to get better, use the spreadsheet to show them how much more expensive their payment will be or how much less house they’re going to be able to afford once the MI costs go up.