Two important rule changes affecting new Federal Housing Administration (FHA) insured borrowers will implemented this year

The first is an increase in the Up Front Mortgage Insurance Premium (UFMIP) which will be implemented on April 5th. The other change affects the seller contribution limit at closing.

On April 5, 2010, lenders must start collecting a higher 2.25% UFMIP. The .50% increase from 1.75% will help shore up the government agency's reserve fund which dropped to .53% in November. Congress mandates the agency maintain a minimum 2% ratio.

The fund covers losses on the mortgages the agency insures. Since the fall of 2008, the reserve fund has dropped steadily from a high of 3% to its low in November.

Some 14.36% of FHA loans were past due in the third quarter,according to the Mortgage Bankers Association. This compares to 9.64% of all loans.

FHA insured nearly a third of new mortgages in 2009.

Realtors with an FHA borrower may still have time to help save their clients additional cost at closing if an FHA case number can be assigned prior to Monday, April 5, 2010.

Time is of the essence. FHA personnel are preparing for a flood of last minute requests.

"Lenders should make every effort to order case numbers early in the week of March 29, 2010," stated Jerrold Mayer in an official agency memorandum from HUD's National Homeownership Center, "since it is possible that case numbers requested on Friday or Saturday may not be assigned prior to April 5, 2010, and therefore, be subject to the higher premium."

This UFMIP policy change will increase premiums for purchase money and refinance transactions, including FHA-to-FHA credit-qualifying and non-credit qualifying streamlined refinance transactions.

The second change expected in early summer 2010 affects the seller's contribution amount towards closing costs, points and prepaids. The new rate will be 3% of the home's sale price, half of the previous 6% rate.

That change, reports Tami Luhby, senior writer at CNNMoney.com, "will bring the agency in line with industry standards and remove the incentive to inflate appraisals."

Your Paramount Mortgage Banker offers more information about the new policy changes and help with FHA insured loans.