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FHA made an announcement about cuts in the annual mortgage insurance premium (MIP) in a preliminary January 2015 announcment. The new FHA policy reduces the rate for most Title II forward mortgages with terms greater than 15 years.

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FHA Loan Articles

News and Updates for Homeowners

FHA Reduces Annual Mortgage Insurance Premiums

January 15, 2015 - When the FHA made an announcement about cuts in the annual mortgage insurance premium (MIP), there was a preliminary announcement in early January 2015, with additional details promised to come. Between the time the initial plan was unveiled and the subsequent FHA clarification of the new MIP rules, there was much speculation on what might happen and how many FHA home loans could be affected.

When the FHA and HUD issued a Mortgagee Letter announcing specifics of those MIP cuts, the mystery was ended. FHA Mortgagee Letter 2015-01 states, “This Mortgagee Letter (ML) communicates revised annual MIP rates for FHA Title II forward mortgages and provides opportunity for cancellation of existing case numbers in order to utilize the MIP rates contained in the ML.”

“The new FHA policy “reduces the rate for annual MIP for all Title II forward mortgages, with terms greater than 15 years, except;
  • Single family forward streamline refinance transactions that are refinancing existing FHA loans that were endorsed on or before May 31, 2009.
  • Section 247 mortgages (Hawaiian Homelands).
This ML supersedes the annual MIP rates established in ML 2013-4. All other sections of ML 2013-4 remain in effect.”

The new rules are intended for FHA loans with case numbers assigned on or after January 26 2015. But some borrowers could still get in on the reduced MIP thanks to additional steps taken by the FHA to help some with recently assigned case numbers who just missed the cutoff date for the lower MIP.

To address this, the FHA mortgagee letter includes this option for lenders:

“To allow mortgagees to obtain the reduced annual MIP rates contained in this ML for loans in process with active FHA Case Numbers, FHA will temporarily approve cancellation requests for active FHA Case Numbers within 30 days of the effective date of this ML.”

“FHA will provide operational details on case cancellations through FHA Info notifications and on FHA’s lender information page available at www.hud.gov/lenders.”

This is an important, temporary measure to help some affected FHA borrowers take advantage of the lower MIP rate. Speak to a loan officer to determine if your loan is affected.