WASHINGTON The White House on Tuesday said it was cutting the costs of some government-insured mortgages in a move that could open the door to cheaper loans for as many as three million borrowers.
The fresh round of changes from the administration affects loans the Federal Housing Administration insures and would reduce fees on those mortgages for borrowers previously unable to borrow at lower rates.
Those using the so-called "streamline" refinance program allows FHA borrowers to win new FHA-backed loans without going through some of the more stringent guidelines that make locking into new loan terms more challenging.
The Obama administration said it will lower the costs on up-front mortgage insurance premiums to 0.01 percent for streamlined refinancings of FHA loans. The White House also said it will cut the annual fee for these refinancings in half to 0.55 percent.
The eligible borrowers for the streamline refinance program must have taken out those FHA loans before June 1, 2009.
Many FHA borrowers have found refinancing prohibitive in recent years because of increased insurance premiums. The administration has been increasing fees for the FHA loans it insures over the last two years since the agency's market share has ballooned.
The changes to the government's streamlined refinancing program could help the typical FHA borrower find "significant monthly savings," according to the administration.
Since mortgage rates are at historic lows and hover around 4 percent, the administration estimates a typical FHA borrower with $175,000 outstanding on their loan could reduce monthly payments to $915 a month and save $100 a month more than the borrower would have under current FHA fees.
(Reporting by Margaret Chadbourn)