On Monday, Bank of America announced that it was extending its FHA loan repayment extension until the end of March, as a result of its mortgage rate reduction efforts.
The lender said the extension will allow borrowers to pay off the mortgages they already have.
As of March 18, the average monthly payment on FHA mortgages is $2,700, according to the Federal Reserve Bank of St. Louis.
However, FHA’s rate reductions aren’t without cost.
According to the Consumer Federation of America, Fannie Mae’s average monthly FHA mortgage payment is $1,750.
For borrowers with a home equity loan, the FHA rate reductions will also put additional pressure on the value of their homes, as interest rates are already at historically low levels.
According to the mortgage lending industry trade group Mortgage Bankers Association, interest rates have been at historically high levels since the beginning of the Great Recession.
“The FHA Rate Reduction Program is designed to prevent rates from rising too quickly for borrowers who need the most relief,” Bank of Americans CEO Charles Kupchan said in a statement.
“As part of the Fannie/Freddie® rate reduction, FHS announced the extension of the extension through the end March.”FHA rate reduction plan:What’s the FHFA rate reduction?
The FHSA’s mortgage rate reductions are designed to keep rates low, the group said.
While the FHLB rate reductions have been well-received by borrowers, some mortgage servicers, including JPMorgan Chase, are concerned that the rate reductions could lead to higher defaults on loans.
Currently, the amount of time a borrower has to refinance their FHA loans is capped at 20 years, the bank said in March.
Since the rate reduction is designed as a temporary measure, borrowers may still be eligible for a rate reduction if their income increases or they receive another type of financial assistance, like a credit card or income-driven refinancing.
The FHLD rate reduction will not affect the FICO scores of borrowers who apply for FHA home equity, as long as they meet the criteria for qualifying.
The FHDA will still be able to increase the amount a borrower’s score can increase by as much as 10 points, but the FHCFA rate reductions do not affect FICOScore scores.
More FHA borrowers need to apply for the FHSFHA and FHFP loans: