We posted previously on the cause of the rising mortgage foreclosures and strategic default. On February 14, 2011 the Department of Housing and Urban Development (“HUD”) showed its love and Valentine’s Day spirit by announcing an increase in premiums for mortgage insurance. The .25% increase is apparently a response to increased mortgage foreclosures and is intended to keep the FHA’s Mutual Mortgage Insurance Fund (“MMIF”) “financially sound,” according to HUD.
You might be scratching your head right now . . . if mortgages are insured against default, why we have had a meltdown in the real estate market over defaulted loans? In other words, why did the banks need to be bailed out of their “bad loans” if they could have looked to mortgage insurance to cover losses? Great question, and the answer is really complicated. You can find it here: The Opposite of Asset Protection.
What you need to know right now is that mortgage insurance is about to get much more expensive starting on April 18, 2011. If you have a pending transaction or are in the market to buy or sell real estate (and if you are going to finance), then you can save a lot of money by closing the transaction prior to April 18th.
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