FHA Requirements: Mortgage Insurance

Mortgage insurance is a policy that protects lenders against losses that result from defaults on home mortgages. FHA requirements include mortgage insurance primarily for borrowers making a down payment of less than 20 percent.

Increase to Annual Mortgage Insurance
President Obama signed a bill on December 23rd, 2011 requiring FHA to increase the Annual Mortgage Insurance Premiums it collects by 10 basis points. According to Mortgagee Letter 12-4, the increase in Annual Mortgage Insurance Premiums will be effective for all case numbers dated on or after April 9th 2012.

HUD is implementing an increase in the annual premium for terms of greater than 15 years and equal to or less than 15 years.

On loans with greater than 15 year terms, the new amount depends on the down payment.

On or after 4/9/2012 on any loan amount - If the loan to value is <= 95%, the new Annual Premium is 120 basis points (bps). If the loan to value is >95%, the new Annual Premium is 125 basis points (bps).

On loans equal to or less than 15 year terms with Loan to Value above 78%, the new amount depends on the down payment.

On or After 4/9/2012 on any loan amount - If the loan to value is <= 90%, the new Annual Premium is 35 basis points (bps). If the loan to value is >90%, the new Annual Premium is 60 basis points (bps).

Note: SF forward mortgages with amortization terms of 15 years or less, and a loan to value ratio of 78% or less, remain exempt from the Annual MIP (Mortgagee Letter 2011-35).

Increase to Up-Front Mortgage Insurance Premium
The UPMIP will be increased from 1.0% to 1.75% of the base loan amount. This applies regardless of the amortization term or LTV ratio. The increase in UPMIP will be effective for all case numbers dated on or after April 9th 2012.

Decrease to Up-Front MIP on certain Streamline FHA Refinances
SF forward streamline refinance transactions that are refinancing FHA loans endorsed on or before May 31, 2009, the UFMIP will decrease from 1 percent to 0.01 percent of the base loan amount and takes effect on or after June 11th, 2012.

Increase to FHA Annual Mortgage Insurance Premium for loans over $625,000
FHA is also exercising its authority to add an additional 25 basis points to mortgages with base loan amounts exceeding $625,000. This increase in Annual Mortgage Insurance Premiums will be effective for all case numbers dated on or after June 11th, 2012.

Decrease to Annual MIP on certain Streamline FHA Refinances
SF forward streamline refinance transactions that are refinancing FHA loans endorsed on or before May 31, 2009, the Annual MIP will be 55 bps, regardless of the base loan amount and takes effect on or after June 11th, 2012.

• For mortgages with terms 15 years and less and with Loan to Value ratios 90 percent and greater, annual premiums will be canceled when the Loan to Value ratio reaches 78 percent regardless of the amount of time the mortgagor has paid the premiums.
• For mortgages with terms more than 15 years, the annual mortgage insurance premiums will be canceled when the Loan to Value ratio reaches 78 percent, provided the mortgagor has paid the annual premium for at least 5 years.
• Mortgages with terms 15 years and less and with loan to value ratios of 89.99 percent and less will not be charged annual mortgage insurance premiums.

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