While the Federal Housing Administration blasted claims that its $1 billion settlement with Bank of America was a bailout, the agency admitted the money, which is part of the $26 billion settlement with the nation’s biggest banks, will shore up its mortgage insurance fund, National Mortgage News reported Feb. 23.
Speaking Feb. 23 in Orlando, Fla., at a conference for the Mortgage Bankers Association, FHA Acting Commissioner Carol Galante said the settlement was not a “gift,” and that the FHA was being compensated for its losses, National Mortgage News reported.
Galante added that the settlement will keep the agency’s mortgage insurance fund from going broke. FHA will apply $750 million from the Bank of America payment to address a $688 million shortfall in the fund.
In related news, the FHA announced Feb. 27 that it will raise mortgage insurance premiums in April to further beef up its emergency fund — by approximately $1 billion.
Mortgage insurance premiums will increase from 1 percent to 1.75 percent of the base home loan amount, regardless of the term or loan-to-value ratio. Additionally, the annual mortgage insurance premium will increase by 10 basis points for loans under $625,500 beginning April 1 and by 35 basis points for loans exceeding $625,000 starting in June.
These increases come on the heels of recent increases on FHA jumbo loans by 25 basis points and premiums on lower balance loans by 10 basis points.