President Barack Obama said 2 to 3 million existing FHA borrowers will be able to refinance at a lower interest rate under a new Federal Housing Administration streamline program that cuts mortgage insurance premiums in half.
The initiative reduces the current 115 basis point annual premium down to 55bps. Borrowers will only have to pay a nominal upfront premium of 1bp.
The reduction in premiums would save the typical borrower $1,000 a year, the President said at a White House press conference Tuesday afternoon. In addition, borrowers would benefit from lower interest payments.
The new streamline refinancing program is open to borrowers who took out a FHA-insured loan before the end of May 2009.
The premium reductions for streamline refinancings of pre-June 2009 FHA loans go into effect June 11.