HUD has announced that effective on FHA case numbers obtained on or after April 1, 2012, FHA mortgage insurance premiums will be higher.
Upfront Mortgage Insurance Premium (UFMIP) will be increased on all FHA loans from 1.00% of the loan amount to 1.75%. Most borrowers opt to add this cost to their loan amounts as FHA will allow this cost to be financed. Homeowners who elect to take advantage of an FHA streamlined refi may receive a portion of the upfront mortgage insurance premium credited back towards the refi closing cost.
UPDATE: FHA will have REDUCED mortgage insurance premiums for streamlined refi’s IF the FHA mortgage that is being refinanced was “endorsed” by HUD prior to June 1, 2009. Click here for more info.
The annual mortgage insurance premium will be increasing an additional 0.10% and for those borrowers with a “high balance” FHA loan will see their premiums go up an additional 0.25% (for a total increase of 0.35%) on June 1, 2012.
The annual mortgage insurance premium is part of an FHA borrower’s monthly mortgage payment and remains with the loan for a minimum of 60 payments AND 78% loan to value is reached.
If you are considering an FHA mortgage, whether it’s for a refinance or purchase, and you have the ability to start the loan process in March and obtain your FHA case number, I highly recommend contacting a local mortgage professional (I’m licensed only for homes located in Washington state) and see what your options are.
UPDATE MARCH 6, 2012: HUD has just announced that there will be reduced mortgage insurance rates for FHA streamlined refinances where the FHA loan that is being refi’d was originated prior to June 1, 2009. A mortgagee letter will follow with more details.
Thanks for the info, Rhonda. I’m a little confused as you said the “up front” MIP was going up, but the example shows the monthly payment going up. Is the monthly MIP going up? Or is that the difference in payment based on the higher MIP being financed?
Hi Ardell. Both are going up. Monthly = annual. The estimates used are based on financing the upfront mortgage insurance premium and the increase in the annual mortgage insurance combined.
Thank you Rhonda. How will this affect to FHA case number that was created prior to April 1st but transfers to different lender after April 1st?
Hi Dan, we need the official “mortgagee letter” from HUD. From HUD’s announcement, it’s based on Case #’s so my assumption would be that the mi rate would follow the case #. We should have confirmation soon.
Thank you again Rhonda. Hopefully the mi rate follow the case #. Thanks!
Dan (and any borrower or real estate agent involved with an FHA transaction) make sure you obtain your actual case number from your mortgage originator. Having a loan application by April 1 does not the same as having an assigned FHA number. If you have an appraisal with your FHA transaction, you should have a case number…but I would still get the actual number from your lender.
Thanks for the update Rhonda. Has HUD sent the letter regarding transferring the case to a different lender after April 1st?
Thank you.
Not as of this morning, Dan. They did issue an mortgagee letter on tightening underwriting guidelines – but not the MI changes. I’ll comment here when that mortgagee letter is issued.
I did a blog post about this recently. This 1% insurance premium increase in FHA loans was done to cover the revenue shortfall caused by the social security payroll tax cut. Also, as you’ve pointed out, this increase will not affect those who have already taken out FHA loans, but only new applicants from April 1, 2012 onwards.
Hi Rhonda,
This change in the FHA results to an increase in total monthly mortgage payment correct? Why would people refinance to a higher payment? I’m confused…
Hi Jill,
People should considering refinancing if it reduces their total mortgage payment (FHA current requires a reduction of at least 5% for a “net tangible benefit”). Folks with higher rates may still benefit – I’m helping clients with FHA streamline refi’s right now (they don’t require an appraisal). However it will become more challenging to meet FHA’s 5% reduction in payment criteria with the higher upfront and monthly mortgage insurance premiums.
UPDATE: HUD HAS ANNOUNCED THAT HOMEOWNERS WHO ORIGINATED THEIR FHA LOAN PRIOR TO JUNE 1, 2009 WILL QUALIFY FOR REDUCED FHA MORTGAGE INSURANCE PREMIUMS WITH AN FHA STREAMLINED REFINANCE: http://www.mortgageporter.com/reportingfromseattle/2012/03/fha-to-reduce-mortgage-insurance-rates-for-some-fha-streamlined-refis.html
Thank you for the update.
Dan, I’m not sure how this may impact you (if you’re the same Dan) if you already have a case number for a loan in progress. We need more details from FHA’s mortgagee letter.
Yes this is he.
Hopefully the letter has more details regarding this. Thank you again.
It’s official: http://portal.hud.gov/hudportal/documents/huddoc?id=12-04ml.pdf
And here’s my summary of all FHA’s mortgage insurance premium changes: http://www.mortgageporter.com/reportingfromseattle/2012/03/hud-issues-mortgagee-letter-conforming-changes-to-mortgage-insurance-premiums.html
Thank you Rhonda. I read the letter and it didn’t mention about the transferring the case # but it seems I should be ok long as the case # was generated prior to April 2011.
Hey Rhonda!
Noticed that the AP story in today’s Seattle Times got the reduced FHA streamline substantially wrong, omitting the important qualifier “if your FHA mortgage was originated before June 2009”
http://www.boston.com/business/articles/2012/03/06/qa_on_administrations_latest_mortgage_aid_plan/
Nice to see you on top of this!
The original announcement stated “originated” which I thought was vague (mentioned it in my post at MP) that I didn’t know how HUD would determine that date – is it the date of the application or ?
Anyhow, the mortgagee letter came out saying effective date is when the mortgage was “endorsed” by HUD for insurance…which can be a couple months AFTER closing.
It’s too bad HUD didn’t make this based on the closing date… something all borrowers could easily find on their own.
Guess that weill keep the folks at HUD busy, as we originators try and find out when someone’s “endorsed” date is.
Thanks for keeping your nose in the news!
I also got wind that FHA was caping the collections on buyers, and any buyer that has a collection over $1000 – has to pay the collection and or set up payment arrangments?
I can’t find the mortgagee letter?
Have you heard?
Thanks,
Shannon
Hi Shannon,
It’s the mortgagee letter just before the mortgage insurance changes… I just haven’t had time to write about this one: http://portal.hud.gov/hudportal/documents/huddoc?id=12-03ml.pdf
Thanks. I totally understand.
Shannon
Hi Rhonda. At the end of February I streamlined an FHA loan that had closed in 2008. The loan would have been eligible for the reduced rates but as it were, I spent about 6K in upfront MIP with monthly costs of around $600. Had I waited a few months, I would have saved around $5400 and $300/month.
I’m certain there are many (infuriated) folks like me who fall into the same category. Do you have any idea if HUD will address folks in this situation?
Hi Larry, I don’t know – I’d be pleasantly surprised if they did.
Thanks. I know there was plenty of awareness that rates would increase in April but was there any talk of the reductions? Or did this just come out of nowhere? Thanks again!
Larry, it seemed to come out *almost* of nowhere. For me, I learned of the increase last week that I began to hear murmurs that reduced mi for streamlined refi’s might happen. This is something I’ve been hoping for since HUD has been jacking up rates over the past few years. Even with the “murmurs” I had no expectation of if or when this would actually happen.
Many homeowners with conventional financing who refinanced after to June 1, 2009 (HARP cut-off) are in the same boat as the folks like you with the new FHA reduced mi program.
I, and I’m sure all, LO’s wish we knew this was coming down the pike for we would advise our clients to wait – I’ve checked on the FHA streamlines I currently have in my pipeline to see when their mortgage was “guaranteed” because I would inform my clients of their options of waiting or going forward.
It’s tough and many get caught in this situation. I wish FHA and HARP didn’t have this June 1, 2009 cut-off.