NEW YORK CNNMoney — Borrowers with some federally insured mortgages will be able to refinance into lower interest rate loans more easily and cheaply under a plan unveiled Tuesday by the Obama administration.
At a news conference, President Obama announced that the Federal Housing Administration will cut upfront fees for refinanced loans it already insures.
The new fees are for borrowers whose FHA loans were issued before June 1, 2009. An estimated 2 to 3 million borrowers could take advantage of the savings, which could reduce mortgage payments for the typical FHA borrower by about a thousand dollars a year, according to the administration.
“Its like another tax cut in peoples pockets,” said President Obama.
Borrowers who refinance their existing FHA loans will pay an upfront insurance premium equal to 0.1%, the lowest allowable rate, of the mortgage amount — $100 for a $100,000 loan — plus an annual fee of 0.55%.
The new refinancing fees contrast sharply with the cost of obtaining a FHA loan, according to Jaret Seiberg, an analyst with the Washington Research Group. A borrower making a 3.5% down payment on a home purchase as of April 1 will pay a 1.75% upfront fee and a 1.25% annual fee. Those purchase fees were raised barely a week ago to improve the FHAs capital reserve.