Mortgage insurance going upThe cost of mortgage insurance backed by the federal government is going up this fall.
By: Brian Bull, Wisconsin Public Radio, Superior Telegram
(MADISON) The cost of mortgage insurance backed by the federal government is going up this fall.
Congress has allowed the Federal Housing Administration to increase its monthly premiums by nearly three times the current amount. An FHA official says the average increase will come to about $40 more a month.
A realtor’s group says some Wisconsin homeowners will be affected, but not as many as in other parts of the country.
Bill Malkasian of the Wisconsin Realtors Association says roughly a third of the mortgages today that Wisconsin buyers apply for are with a government-backed option, including the FHA program. He says it’s popular because it requires a low down payment and a slightly lower credit score.
“So the people who get in the program sometimes are the ones that statistically would be the first to potentially default due to the loss of a job or other issues,” says Malkasian. “And so because of that, the FHA insurance portion is being stressed, so logically this particular fund is going to have to pay back for the loans that are defaulting.”
Malkasian says overall, the number of defaults in Wisconsin has been leveling off, and they aren’t as severe as in the rest of the country. He says that’s because the majority of lenders in Wisconsin are very conservative and do lots of income checks.
“And Wisconsin didn’t have some of the stuff happening that was going on in California and Vegas,” Malkasian says. “We have a foreclosure rate of about one in every 1,200 homes in the state. If you take Las Vegas by itself, their foreclosure rate was one in every 76 properties.”
Malkasian says the increase will probably affect the size of home prospective buyers can afford. To help, the FHA is cutting the initial down payment for insurance to $1,000 on average.