FHA does not make mortgage loans, they do, however, insure the banks against default. So, FHA is basically an Insurance Company. Each entity buying FHA loans is insured against the borrower falling into some consequence that keeps them from making their payments.
Because so many people have actually gone into foreclosure, FHA has changed the rates of the insurance (or PMI) that they charge on loans. This week, FHA announced their FHA PMI (or Mortgage Insurance Program) will see additional rate changes in April of 2012, and June of 2012.
(Just to be clear – The “industry” term for this default insurance for FHA is referred to as MIP – however, most of the people we talk to think of it as “PMI” and therefore, we refer to it as FHA PMI.)
Effective with today’s announcement, the two tiers of FHA PMI change as follows: [Read more...]