Mortgage Insurance

The Obama administration's new plan to stimulate refinancings of FHA mortgages is likely to help large numbers of homeowners — even those who are deeply underwater — cut their monthly costs by switching to a loan with a rate below 4%. Here's a quick overview of the "streamline refi" program and what it will take for you to qualify. First, the baseline criteria: Your current home loan must be FHA-insured and must have been put on the Federal Housing Administration's books no later than May 31, 2009.

If you're considering buying a house with an FHA mortgage and expect the seller to help out with your closing costs, here's a heads-up: The Federal Housing Administration plans to impose significant restrictions on the amount of money that sellers can contribute at closing in the near future. On top of that, the FHA also will be raising its mortgage insurance premiums during the coming weeks, increasing charges for new purchasers across the board. You might ask, why hit us with additional financial burdens right now, just as housing is showing modest signs of recovery in many areas and the spring buying season is getting underway?

Though its demise drew little attention because of the partisan year-end brawl over the payroll tax cut extension in Congress, a key mortgage financing benefit disappeared at the end of December: the ability of large numbers of home buyers and owners to write off the premiums they pay for mortgage insurance. The loss of that tax deduction — plus mandatory new fees imposed by Congress on all new conventional and FHA loans — could effectively increase the costs of homeownership this year.

If you own a home, it pays to know the tax breaks that could be available to you. Here are five deductions spotlighted by personal finance writer David Bakke for the Zillow real estate blog. For more specific information, see your tax preparer or call the IRS help line at (800) 829-1040. • Mortgage interest. You're generally entitled to reduce your taxable income by the amount of mortgage interest you pay, as long as you itemize deductions on your tax return. Your lender should have sent you a 1098 form in January showing exactly how much interest was paid.

The most ambitious federal mortgage program to date aimed at millions of underwater homeowners is poised to take off in the coming two weeks, yet some key issues could hinder borrower participation. One of them involves something most owners know nothing about: Who was your mortgage insurer on your underwater loan? Though it was announced by the Obama administration late last year, "HARP 2.0" — the second version of the Home Affordable Refinance Program — will finally hit full stride around the middle of this month, when Fannie Mae and Freddie Mac finish tweaking their automated underwriting systems to accept applications, and lenders and mortgage insurance companies start handling large volumes of requests.

Is the Federal Housing Administration losing some of its post-boom, post-bust oomph? Is the Obama administration's plan to gradually throttle back the FHA's home mortgage insurance volume already having effects — and if so, what might this mean to you as a buyer? There are definitely signs that something is brewing: •Total applications for FHA-insured single-family mortgages are down 30% year over year through March, according to the agency's data. Applications from prospective home purchasers are down 35%. The FHA's popularity with buyers previously had sustained its high origination volumes.

So you want to refinance your house, but it's not worth enough for you to get a good loan in the current market? A new Obama administration program is designed to fix that problem for millions of homeowners. Here's how it works. In the past, the federal Fannie Mae and Freddie Mac mortgage programs would only handle loans of up to 80% of your home's value, unless you bought mortgage insurance. And if you owed more than your home was worth, you were flat out of luck.

If you own a home, it pays to know the tax breaks that could be available to you. Here are five deductions spotlighted by personal finance writer David Bakke for the Zillow real estate blog. For more specific information, see your tax preparer or call the IRS help line at (800) 829-1040. • Mortgage interest. You're generally entitled to reduce your taxable income by the amount of mortgage interest you pay, as long as you itemize deductions on your tax return. Your lender should have sent you a 1098 form in January showing exactly how much interest was paid.

The nation's go-to housing finance program for the last few years is about to become more expensive. Or is it? Beginning Monday there will be changes in the way borrowers pay for the privilege of using low-down-payment, government-insured mortgages to buy or refinance a house. An analysis shows that, although the monthly premium will rise 64%, the overall cost will fall ? at least in the short term. That's because the Federal Housing Administration also is trimming its upfront premium, to 1% of the loan amount from 2.25%.

QUESTION: The recent earthquake in San Francisco forced thousands of families throughout the Bay Area to flee their homes and find other living arrangements. I understand that those homeowners with earthquake insurance stand to recover a substantial portion of their losses. But even these fortunate people are faced with extra living expenses, as well as their regular monthly mortgage. Is this a case where having mortgage insurance would be a great benefit? --J. R. B. ANSWER: No, not really.

Citigroup Inc. is paying $158 million to settle accusations that it took advantage of a federal mortgage insurance program. In a settlement with the Justice Department, Citi admitted that it provided misleading information about the quality of its mortgages to a federal insurance program run by the Department of Housing and Urban Development. The government provided backing for the mortgages and ended up losing millions when the borrowers defaulted. In the complaint filed Wednesday as part of the settlement, the U.S. attorney's office in Manhattan said CitiMortgage violated the rules of the Federal Housing Administration insurance program for six years until it was subpoenaed in July.

Though its demise drew little attention because of the partisan year-end brawl over the payroll tax cut extension in Congress, a key mortgage financing benefit disappeared at the end of December: the ability of large numbers of home buyers and owners to write off the premiums they pay for mortgage insurance. The loss of that tax deduction — plus mandatory new fees imposed by Congress on all new conventional and FHA loans — could effectively increase the costs of homeownership this year.

Is the Federal Housing Administration losing some of its post-boom, post-bust oomph? Is the Obama administration's plan to gradually throttle back the FHA's home mortgage insurance volume already having effects — and if so, what might this mean to you as a buyer? There are definitely signs that something is brewing: •Total applications for FHA-insured single-family mortgages are down 30% year over year through March, according to the agency's data. Applications from prospective home purchasers are down 35%. The FHA's popularity with buyers previously had sustained its high origination volumes.

The nation's go-to housing finance program for the last few years is about to become more expensive. Or is it? Beginning Monday there will be changes in the way borrowers pay for the privilege of using low-down-payment, government-insured mortgages to buy or refinance a house. An analysis shows that, although the monthly premium will rise 64%, the overall cost will fall ? at least in the short term. That's because the Federal Housing Administration also is trimming its upfront premium, to 1% of the loan amount from 2.25%.

The Federal Housing Administration isn't talking publicly about it, but the agency may be getting ready to cut the upfront costs of reverse mortgages for some borrowers. The agency also, however, may be reducing the amount seniors can borrow against their homes. In a recent conference call with industry participants, FHA officials said they were finalizing plans to offer a home-equity conversion mortgage requiring almost no upfront mortgage insurance premium, according to the National Reverse Mortgage Lenders Assn.

If you're a buyer with little cash or a small-scale investor looking for a deal on a foreclosed house, a little-publicized national lending program could be just what you need this fall. Here's what it offers: • Minimal down payments — 3% for buyers who plan to live in the house, 10% for investors. Most of your down payment can come from documented gifts from relatives or others with no direct connection to the transaction. • No requirement for an appraisal on the property unless you're applying for additional money to renovate the house.

In a move designed to help home buyers with good credit but small savings, Fannie Mae said it will reduce the amount of mortgage insurance required for borrowers who make down payments of less than 20% of a home's purchase price. Franklin D. Raines, chairman and chief executive of the Washington-based company, made the announcement at the National Assn. of Home Builders convention in Dallas.

Anyone who has purchased a house in the past few years is likely to have received a flood of mail from insurers and agents peddling "mortgage protection." "Buying a home is one of the largest single investments a person can make. This kind of investment needs to be protected!" one mailer announces. "Will you leave your spouse with a deed or a debt?" Industry experts are rarely ambivalent about the product. Some say it's a needed protection for consumers.

The Obama administration announced Wednesday that as part of an effort to stabilize housing markets it will send a $3-billion lifeline to jobless homeowners struggling to make mortgage payments. Tapping into resources from the $700-billion Wall Street bailout, the Treasury Department will add $2 billion to its Hardest Hit Fund, assisting the 17 states that have unemployment rates higher than the national average, along with Washington, D.C. California will receive $476 million, the most of any state.

The low-down payment mortgage landscape is changing. The Federal Housing Administration, which insures lenders for losses incurred should a borrower not make his payments as promised, is pulling in its horns in an effort to remain solvent in the face of a rising number of delinquencies and foreclosures. At the same time, though, some of the half a dozen private companies that provide lenders with similar protection against defaults are quietly reentering the market, a market they all but vacated when the housing sector tanked.