It was just over two years ago when President Obama vowed to eliminate the danger of financial institutions becoming "too big to fail," but now it has become apparent that the nation's largest banks are BIGGER than they were before the credit markets seized. The Federal Reserve reported that at the end of 2011, the Top 5 banks (JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, and Goldman Sachs) held $8.5 trillion in assets, equal to 56% of the U.S. economy. This is up from 43% from five years earlier. And these 5 banks combined are nearly twice as large as they were 10 years ago! So much for the plan.
Earlier this week, President Obama announced that for FHA home loans originated prior to June 1, 2009, the up-front mortgage insurance premium (UFMIP) for streamlined refinance transactions would decline to 0.1% from 1.0% and the annual fee would drop from 1.15% to 0.55%. A quick calculation shows that on a $400,000 home loan that a borrower would save $3600 ($4000 - $400) on the UFMIP alone.
Some industry insiders have suggested that loan prepayment speeds will pick up as a result. However I'm not convinced that many homeowners with FHA mortgages will be able to take advantage of the program changes, given that roughly two-thirds of all FHA-insured 30 year fixed mortgages were originated AFTER the above mentioned cutoff date.
More importantly, what about all the people who have already secured an FHA streamline refinance over the past couple year that now cannot take advantage of these new rules? Once again it seems that people who acted quickly to make life better (refinanced already) get the short end of the stick as they appear to be stuck with the 1% UFMIP factor and the monthly 1.15% mortgage insurance factor. Those who procrastinated or those who already have a decent rate are the ones left to possibly benefit. We can only hope that everyone who streamline refinanced this year will eventually have their MIP reduced, so that they too can enjoy greater monthly savings.
Below is a link regarding some of the additional details of the program:
Landmark Mortgage Group is a division of Opes Advisors and licensed by the CA Dept. of Real Estate, Real Estate Broker license 01458652 and NMLS 235584. Equal Opportunity Lender.