Changes to FHA Mortgage Insurance Announced

Written By: Stacey Sprain

Last week I outlined upcoming changes to FHA’s mortgage insurance premium structure based on preliminary communication from HUD but subject to the release of an official Mortgagee Letter. Since then Mortgagee Letter 2012-4 has been issued which communicates the finalized changes to FHA’s mortgage insurance premium structure.

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The changes that were initially announced to be effective for cases assigned on and after April and June 1st are now effective for cases assigned on and after April 9, 2012 and on and after June 11, 2012 for loan amounts that exceed $625,500. Additional information was also added regarding reduced up-front and annual premiums for certain FHA streamline refinances and applies for cases assigned on and after June 11, 2012.

Warning to all- HUD couldn’t have made it any more confusing for us. We will all be challenged in the coming months with making sure we have communications and systems in place to assure we are using the correct MI premiums as determined by case assignment date, loan term, loan type, loan amount and LTV. Below I have attempted to lay it out in as organized a fashion as I’ve been able to determine after uncrossing my eyes which crossed while reading through the Mortgagee Letter.

Up-Front MIP Increase
• If the FHA case is assigned on and after 04/09/2012: UFMIP = 1.75% per Mortgagee Letter 2012-4
• If the FHA case is assigned 10/04/2010 – 04/08/2012: UFMIP = 1.00%

Annual MI Increases
If the FHA case is assigned on or after 04/09/2012 per Mortgagee Letter 2012-4
• > 15 yr Term: > 95% LTV = 1.25%
<=95% LTV = 1.20%
• < = 15 yr Term: > 90% LTV = .60%
>=79% LTV = .35%
• Single Family forward mortgages with amortization terms of 15 years or less, and a loan-to-value (LTV) ratio of 78 percent or less, remain exempt from the Annual MIP (see Mortgagee Letter 2011-35).

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If the FHA case is assigned 04/18/2011 – 04/08/2012
• > 15 yr Term: > 95% LTV = 1.15%
<=95% LTV = 1.10%
• < = 15 yr Term: > 90% LTV = .50%
>=79% LTV = .25%
• Single Family forward mortgages with amortization terms of 15 years or less, and a loan-to-value (LTV) ratio of 78 percent or less, remain exempt from the Annual MIP (see Mortgagee Letter 2011-35).

If the FHA case is assigned on or after 06/11/2012 AND the base loan amount exceeds $625,500 Mortgagee Letter 2012-4:
• > 15 yr Term: > 95% LTV = 1.50%
<=95% LTV = 1.45%
• < = 15 yr Term: > 90% LTV = .85%
>=79% LTV = .60%
• Single Family forward mortgages with amortization terms of 15 years or less, and a loan-to-value (LTV) ratio of 78 percent or less, remain exempt from the Annual MIP (see Mortgagee Letter 2011-35).

Up-Front MIP Decreases for Certain FHA to FHA Streamline Refinances
If FHA case assignment is dated on and after 06/11/2012 and the current FHA loan being paid off was endorsed prior to 06/01/2009 per Case Query in FHA Connection, up-front MIP = .01% and annual MI = .55%.

FHA determined that these increases are necessary to encourage the return of private capital in the residential mortgage market and strengthen the Federal Housing Administration’s (FHA) Mutual Mortgage Insurance Fund. Taken together, these premium changes will enable FHA to increase revenues at a time that is critical to the ongoing stability of its Mutual Mortgage Insurance (MMI) Fund, contributing more than $1 billion to the Fund, based on current volume projections through Fiscal Year 2013. FHA estimates that the increase to the upfront premium will cost new borrowers an average of approximately $5 more per month.

Need FHA Training? CLICK HERE: http://www.FHA-Classes.org

I anticipate FHA will issue further direction to answer many questions that will arise from lenders as a result of this latest Mortgagee Letter, particularly in regards to streamline refinance cases already in process for borrowers who will now wish to take advantage of the lower premiums that won’t be available until 06/11/2012.


About The Author

Stacey Sprain - As an NAMP® staff writer, Ms. Stacey Sprain is currently a NAMP® member in good standing, and is a NAMP® Certified Ambassador Loan Processor (NAMP®-CALP). With over 15+ years of mortgage banking experience, Stacey is also a Quality Control Manager for a major mortgage lending institution. If you would like to become a volunteer writer for us, please email us at: contact@mortgageprocessor.org.


Opinion-Editorial (Op-Ed) Disclaimer For NAMP® Library Articles: The views and opinions expressed in the NAMP® Library articles are those of the authors and do not necessarily reflect any official NAMP® policy or position. Examples of analysis performed within this article are only examples. They should not be utilized in real-world application as they are based only on very limited and dated open source information. Assumptions made within the analysis are not reflective of the position of NAMP®. Nothing contained in this article should be considered legal advice.