Revision of FHA Policies Concerning MIP

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Filed under: FHA Loans

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The U.S. Department of Housing and Urban Development just published Mortgagee Letter (ML) 2013-14 which centers on the revision of Federal Housing Administration (FHA) policies concerning cancellation of the annual Mortgage Insurance Premium (MIP) and increase to the annual MIP.

The purpose of this revision is so the FHA can be consistent with its ongoing efforts to strengthen the Mutual Mortgage Insurance Fund.

FHA is doing the following:

• 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% 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

It is important to note that the section of this ML that increases the annual MIP is effective for case numbers assigned “on or after April 1, 2013,” except as notated below.

However, the following sections of this Mortgagee Letter are effective for all mortgages with FHA case numbers assigned “on or after June 3, 2013:”

• Revision to the period for assessing the annual MIP
• Removal of the exemption from the annual MIP for loans with terms of 15 years or less and LTV’s of less than or equal to 78% at origination
• Increase in the annual MIP for mortgages with terms less than or equal to 15 years and LTV ratios less than or equal to 78 % at origination

It is also important to know that this revised ML:

• Rescinds the automatic cancellation of the annual MIP collection announced in ML’s 2000-38 and 2000-46
• Rescinds ML 2011-35, under which mortgages with terms of 15 years of less and LTV’s of less than or equal to 78% at time of origination were exempt from the annual MIP
• Rescinds and updates various sections of the HUD handbook as appropriate.

This ML increases the annual MIP on all forward mortgages previously announced in ML 2012-14, except single family forward streamline refinance transactions that are refinancing existing FHA loans that were endorsed on or before May 31, 2009; the rate for those streamline transactions remains at the level announced in ML 2012-14.

Now, for loans with FHA case numbers assigned “on or after June 3, 2013,” FHA will collect the annual MIP for the maximum duration permitted under statute. For all mortgages regardless of their amortization terms, any mortgage involving an original principal obligation less than or equal to 90% 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.

And, for any mortgage involving an original principal obligation with an LTV greater than 90%, 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.  This means for the life of the loan.

Finally, the changes to the duration of the annual MIP as specified in this ML are effective for “all” Single Family FHA programs for which FHA charges an annual MIP except Title I and Home Equity Conversion Mortgages. And, the increases in the annual MIP specified in this ML apply to all mortgages insured under FHA’s Single Family Mortgage Insurance Programs except the following:

• Streamline refinance transactions of existing FHA loans that were endorsed on or before May 31, 2009
• Title I
• Home Equity Conversion Mortgages
• Section 247 (Hawaiian Homelands)
• Section 248 (Indian Reservations)

If you have an FHA loan or are considering one and are concerned about the new policies or have any questions, please don’t hesitate to call as I can go over in more detail what all of this means to your loan.

 

 

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