FHA Raises Forward Mortgage Insurance Premiums, Adjusts MIP Requirements

The Federal Housing Administration announced Thursday it is making changes to its mortgage insurance premium (MIP) requirements and is raising the MIP on FHA loans as of April 1. While the MIP for many loans was previously canceled at a certain Loan to Value ratio, the terms under which the borrower pays MIP have been extended, in some cases for the entire duration of the loan. 

The changes have been announced as an effort for FHA to shore up its struggling insurance fund, which came under scrutiny as a result of an audit of the fund in late 2012.

As outlined in Mortgagee Letter 2013-4, the administration is revising the period under which it assesses the annual MIP; is removing the exemption from the annual MIP for loans with terms of 15 years or less and loan to value ratios of less than or equal to 78% at origination; and is increasing the annual MIP on all forward mortgages except streamline refinances of existing FHA loans endorsed before May 31, 2009. 

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Most loans will see a 10-basis point-increase, depending on the loan amount and loan term, according to the Mortgagee Letter. 

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Written by Elizabeth Ecker

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