FHA Reduces Mortgage Insurance Premiums for FHA Loans

Scissors_Cutting_MoneyThe Federal Housing Administration recently announced that as of January 26, 2015, it will reduce the annual mortgage insurance premiums for FHA loans by .5%.  On average, the reduction could save an FHA loan borrower about $900 per year. (Learn more about FHA Loans.)

What Are FHA Mortgage Insurance Premiums?

If you get an FHA-insured loan you’ll have to pay mortgage insurance (mortgage insurance protects the lender in the event you default on loan payments). There are two types of mortgage insurance premiums (MIPs) that you must include in your FHA loan agreement:

  • Upfront premium. This is a one-time payment that you make when you first get the loan. It is currently 1.75% of the loan amount. The new FHA rules do not change this premium amount.
  • Annual premiums. Unless your loan-to-value rate is substantial, you’ll also be required to pay annual mortgage insurance premiums. Although called annual premiums, you pay them monthly. The amount you pay is based on the length of your loan, the amount you borrow, and your loan-to-value rate.

Reduction in FHA Annual Mortgage Insurance Premiums

The FHA’s new rules reduce the annual premium by .5% for loans that are greater than 15 years. While the total percentage that you must pay for annual premiums varies based on a number of factors, most people are currently paying 1.35% for loans greater than 15. The new rates for these loans will be .85%. (The MIP rates on loans that last less than 15 years will not change; those loans already have a rate lower than .85%.)

U.S. Department of Housing and Urban Development Secretary Julian Castro predicts the new rates will save the average FHA loan borrower about $900 per year.

When Does the Premium Reduction Go Into Effect?

The new rates will apply to loans made on or after January 26, 2015.

What If You Already Have a Loan With Higher Premiums?

The FHA announced two fixes if you already have a loan with higher premiums or if you are currently in the loan process.

Cancel loans in process. The FHA will allow lenders to cancel loan files already in process so that borrowers can start over and get the lower premium rate.

Refinance. If you have an FHA loan made after May 31, 2009, you can refinance in order to get a new loan with the lower premium. (Loans made prior to May 31, 2009 already have lower rates.)

Can I Extend My Chapter 13 Bankruptcy Plan Beyond Five Years to Pay a Claim?

Leon Bayer PhotoASK LEON 

Bankruptcy expert Leon Bayer answers real-life questions.

Dear Leon, 

I have been in Chapter 13 bankruptcy for five years and just made my last plan payment. But the trustee now says I have to pay an additional $8,000 before I am done with my bankruptcy and can get a discharge. The trustee has filed a motion to dismiss my case. 

I have talked to several bankruptcy lawyers, and they all agree that the trustee is correct – I do in fact have to pay the additional $8,000 into my Chapter 13 plan. 

I don’t have the money right now and my five year plan is over. I’m worried that if the trustee dismisses my case, the unpaid interest on my credit cards will become due. But I don’t have the money to make the $8,000 payment. 

Can I extend my case beyond the five years in order to spread this payment out over time?  I have a hearing next month on the trustee’s motion to dismiss. 

Sincerely,

Grace 

Dear Grace,

Unfortunately you are not allowed to extend your Chapter 13 payment plan beyond five years (60 months). (Learn more about the Chapter 13 bankruptcy plan and how long it can last.) If the trustee dismisses your case, you’ll owe the $8,000 plus interest on all the debt you paid through your plan over the past five years. This could be a lot of money.

Another Way Around the Five Year Plan Limit

But you might be able to get extra time to pay a different way. Hire a lawyer and have that lawyer file an opposition to the trustee’s motion to dismiss.

In the opposition, explain what happened, tell the court that you need six more months to pay off the $8,000, and ask the court to continue the hearing on this matter, giving you time to finish the job. After filing the motion, your lawyer should ask the Chapter 13 trustee if he or she will agree to continue the hearing. I think any decent trustee will agree, probably giving you a series of continuances over the next six months so you can pay as promised.

Why This Might Work

While you can’t officially modify your plan to extend it to 66 months, there is nothing in the law preventing the trustee from accepting your voluntary payments, even after your plan is over.

If the trustee will not agree, then make your argument to the judge. I think there is a good chance the judge will agree to the proposal if you have had a good Chapter 13 payment record up to now.

Good luck.

Leon Bayer is a Los Angeles bankruptcy attorney.  He is a partner at Bayer, Wishman & Leotta, a California law firm specializing in bankruptcy.  The opinions and advice in this blog post are from Mr. Bayer alone, and should not be attributed to Nolo.  By answering a question on this blog, Mr. Bayer does not become your lawyer.

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California Unclaimed Property

The California State Controller has made it easier for folks who may have left some “unclaimed property” in the hands of the state to get the money back.

The Controller has put into place an “eClaim” process for use by owners to claim accounts worth up to $1,000 (previously $500).  This electronic procedure allows folks to file a claim online instead of using the previous paper form filing process.

Check out www.sco.ca.gov for more details.

Hey, All Those Cat Videos Have Helped Nonprofits Serving Animals!

catOne of the biggest questions currently on the minds of nonprofit development staff is, “How do we effectively use the Internet and social media to get our message out?” (See Nolo’s articles on Nonprofit Fundraising for more on this topic generally.)

Sometimes, just getting heard amid all the noise is nigh on impossible. Email open rates, for example, reportedly declined 4% from 2012 to 2014, such that only 13 people out of the hundred on your list will so much as view what the email contains. (Poof! Gone.)

So, let’s take a moment to celebrate some actual good news, an indicator that there is a way through the noise, or at least a benefit to the volume of what can be found online: According to Terrence Petty of the Associated Press, “Cat adoptions leap with help of Internet.” That is, the popularity of cute cat videos (hey, did you see the one with the German weather broadcaster?) have not only helped nonprofits place cats for adoption, but have RAISED THE LEVEL OF ADOPTIONS OVERALL, as people develop a greater sense of affinity with felines.

No comprehensive statistics yet exist, but one study cited by Petty found a 111% rise in cat placements. (What happened to the cats who weren’t placed? Uh oh, better not ask that.) Equally significant are the anecdotal accounts of shelters who have successfully used the Internet to place cats who were elderly or otherwise hard to find adopters for.

Okay, but not every nonprofit helps something that’s cute and easily videotaped. But surely this is also a reminder of the importance of visuals in our ADD-addled world. I’ll be every nonprofit can, with a little creativity, come up with some visuals.

Home Mortgage Debt Forgiveness Exclusion Extended

A discharge of indebtedness generally results in the recognition of gross income.  Under the “mortgage forgiveness exclusion” which otherwise applied to debt discharged before January 1, 2014, any discharge associated with “qualified principal residence indebtedness” was excluded from gross income up to $2 million of debt on a joint return.  The debt must have been used to acquire, construct, or substantially improve the taxpayer’s principal residence, or to refinance the debt and must have been secured by the residence.

Under the recent “2014 Tax Increase Prevention Act,” the exclusion will apply for an additional year – to debt discharged before January 1, 2015.