Miami Home Loan Discusses the New FHA MI Changes

Miami Home Loan 4 UMiami Home Loan and Element Funding  staff reports there are two key changes scheduled to take place for all FHA case numbers assigned on or after June 3, 2013:

• revision to the period for assessing the annual Mortgage Insurance Premium

• removal of the exemption from the annual MIP for loans with terms of 15 years or less and LTVs of ≤ 78%

This is not a MIP Premium change… It is a change in the length of time the monthly MIP will remain in effect on a FHA file.

1. Revision to the Period for Assessing Annual MIP

• LTV < 90%: Regardless of the loan term, for any mortgage with an original principal obligation, excluding financed Up-Front MIP (UFMIP), that is ≤ 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 • LTV > 90%:  For any mortgage with an original principal obligation (excluding financed UFMIP) that is LTV > 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

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. The following table shows the previous and the new duration of annual MIP by amortization terms and LTV ratios. All MIP durations in this table are effective for case numbers assigned on or after June 3, 2013.

Term   LTV%  Previous New 
<=15 Yrs <-78  No annual MIP  11 years 
<=15 Yrs  >78 – 90.00   Cancelled at 78% LTV  11 years
<=15 Yrs   > 90 Cancelled at 78% LTV LoanTerm
>15 Yrs   <-78  5 Yrs  11 years
>15 Yrs   >78-90.00 Cancelled @ 78% LTV & 5 Yrs   11 years
>15 Yrs   >90.00  Cancelled @ 78% LTV & 5 Yrs LoanTerm

Exceptions to Annual MIP Duration Changes The changes to the duration of the Annual MIP specified in the Mortgagee Letter apply to all Single Family FHA programs for which FHA charges an annual Mortgage Insurance Premium except:

•   Title 1

•   Home Equity Conversion Mortgages

2. Removal of Exemption from Annual MIP for loans with terms of 15 years or less and LTVs ≤ 78%

The following table shows the previous and the new effective annual MIP rates for loans with an LTV of ≤ 78%, and with terms of up to 15 years, which were formerly exempt. The new annual MIP for these loans is effective for case numbers assigned on or after June 3, 2013.

TERMS <= 15 Years
Base Loan Amt. LTV Previous MIP New MIP
Any Amount  <=78%  0 bps  45 bps

Exceptions to Annual MIP Increases The increases in the Annual MIP specified in the Mortgagee Letter apply to all mortgages insured under FHA’s Single Family Mortgage Insurance programs except: •   Streamline refinance transactions of existing FHA loans that were endorsed on or before May 31, 2009 •   Title 1 •   Home Equity Conversion Mortgages •   Section 247 (Hawaiian Homelands) •   Section 248 (Indian Reservations)

Purpose of these changes: WASHINGTON – As part of a broad effort to strengthen the Federal Housing Administration’s (FHA) Mutual Mortgage Insurance Fund (MMI Fund), FHA Commissioner Carol Galante announced a series of changes to be issued this week that will allow the agency to better manage risk and further strengthen the health of the MMI Fund. “These are essential and appropriate measures to manage and protect FHA’s single-family insurance programs” said Galante. “In addition to protecting the MMI Fund, these changes will encourage the return of private capital to the housing market, and make sure FHA remains a vital source of affordable and sustainable mortgage financing for future generations of American homebuyers.” (Exerpt from HUD Mortgage Letter-HUD No.13-010.)

If you have any questions, call me at 305-868-7485, or call the FHA Resource Center at 800-CALLFHA.  Miami Home Loan staff, Element Funding staff, and me, James Carter are ready to help with any questions on these important FHA MI changes.  My number is 305-525-6742.

 

 

 

 

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