The Federal Housing Administration announced the details of its efforts to lower the costs of refinancing for borrowers with loans insured by the agency.

Starting on June 11, 2012, FHA will lower its upfront Mortgage Insurance Premium (MIP) to 0.01% and reduce its annual premium to 0.55% for certain FHA borrowers. In order to qualify, borrowers must be current on their existing FHA insured mortgages and the loans must have been endorsed on or before May 31, 2009.

“This is one way that FHA can make a real difference to help homeowners who are doing the right thing, paying their bills on time and want to take advantage of today’s low interest rates,” said Carol Galante, Commissioner of FHA in a statement. “By significantly reducing costs for these borrowers, we can make certain they cut their monthly mortgage burden which will benefit the housing market and the broader economy in the process.”

FHA estimates that borrowers with rates 5% and up could save approximately $3,000 a year or $250 per month. While the changes will help many borrowers, the lower premiums do not apply to agency’s reverse mortgage program.

The American Bankers Association welcomed the changes announced by the Obama Administration.

“The President’s plan to remove cost impediments for borrowers that refinance FHA loans, broadening the accessibility of mortgage relief, is sensible,” said Frank Keating, president and CEO, American Bankers Association in a statement. “This will significantly broaden refinancings during this low rate environment.”

View a copy of the Mortgagee Letter here.