Big Changes with FHA Mortgage Insurance

With FHA PMI changes effective April 1, FINALIZE YOUR CONTRACT AND GET YOUR FHA CASE NUMBER ON YOUR FHA LOAN AS SOON AS POSSIBLE!

FHA PMI MORTGAGE INSURANCE CHANGES EFFECTIVE APRIL 1, 2013

Subject:

Revision of Federal Housing Administration (FHA) policies concerning cancellation of the annual Mortgage Insurance Premium (MIP) and increase to the annual MIP

Purpose:

Consistent with FHA’s ongoing efforts to strengthen the Mutual Mortgage Insurance Fund, FHA is:

-Revising the period for assessing the annual MIP

-Removing the exemption from the annual MIP for loans with terms of 15 years or less and Loan to Value (LTV) ratios of less than or equal to 78 percent at origination

-Increasing the annual MIP on all forward mortgages except single family forward streamline refinance transactions that refinance existing FHA loans that were endorsed on or before May 31, 2009 

DETAILS:

For all mortgages regardless of their amortization terms, any mortgage involving an original principal obligation (excluding financed Up-Front MIP (UFMIP)) less than or equal to 90 percent LTV, the annual MIP will be assessed until the end of the mortgage term or for the first 11 years of the mortgage term, whichever occurs first.

For any mortgage involving an original principal obligation (excluding financed UFMIP) with an LTV greater than 90 percent, FHA will assess the annual MIP until the end of the mortgage term or for the first 30 years of the term, whichever occurs first.

Note: FHA calculates LTV as a percentage by dividing the loan amount (prior to the financing of any UFMIP) by the lesser of the purchase price (if applicable) or the appraised value of the home. For streamline refinances without appraisals, FHA uses the original appraised value of the property to calculate the LTV.

Under Public Law 111-229(1)(b), FHA may adjust its mortgage insurance premium rates, as measured in basis points (bps), by Mortgagee Letter.

The first table shows the previous and the new annual MIP rates by amortization term, base loan amount and LTV ratio. All MIPs in this table are effective for case numbers assigned on or after April 1, 2013.

Term > 15 Years
Base Loan Amt.      LTV                       Previous MIP                      New MIP
≤ $625,500                ≤ 95.00%               120 bps                                130 bps
≤ $625,500                > 95.00%               125 bps                                135 bps

> $625,500                ≤ 95.00%               145 bps                                150 bps

> $625,500                > 95.00%               150 bps                                155 bps

Term ≤ 15 Years

≤ $625,500              78.01% - 90.00%     35 bps                                 45 bps

≤ $625,500              > 90.00%                  60 bps                                 70 bps

> $625,500              78.01% - 90.00%     60 bps                                 70 bps

> $625,500              > 90.00%                  85 bps                                  95 bps

The second table shows the previous and the new effective annual MIP rates for loans with an LTV of less than or equal to 78 percent and with terms of up to 15 years.

The new annual MIP for these loans is effective for case numbers assigned on or after June 3, 2013.

Term ≤ 15 Years
Base Loan Amt. LTV              Previous MIP                New MIP
Any Amount ≤ 78.00 %          0 bps                               45 bps