More Changes to FHA Up Front & Annual Mortgage Insurance Premiums?

8-16-2014: Borrowers must now pay an up-front fee of 1.75 percent of the loan balance and up to 1.35 percentage points in annual mortgage-insurance premiums.

Well, I really don’t see any future reductions in rates (especially since they’ll be requesting $16+ Billion loan for losses).  In fact, they have risen at least 2 years in a row.  If there are more foreclosures to come, it’s just like any other insurance rate – it must go up to cover losses.  At least that makes economic sense – but this is the Federal Government so anything can happen!

2-1-2013:  Here’s the basics…Annual FHA MIP will remain for life of most FHA loans…

– For all mortgages regardless of their amortization terms, any mortgage involving an original principal obligation (excluding financed Up-Front MIP (UFMIP)) less than or equal to 90 percent LTV, the annual MIP will be assessed until the end of the mortgage term or for the first 11 years of the mortgage term, whichever occurs first.

– For any mortgage involving an original principal obligation (excluding financed UFMIP) with an LTV greater than 90 percent, FHA will assess the annual MIP until the end of the mortgage term or for the first 30 years of the term, whichever occurs first.

Source:  Mortgagee Letter 2013-04

12-11-2012: Sometime in 2013, FHA will make the annual FHA MIP payments permanent – that’s right – they will never disappear. Right now, Federal law require their elimination once the loan balance reaches 78% of the original value of the property, but that will change in 2013.

Update 11-14-12: If FHA runs out of funds, will rates rise to help fund?
WSJ article warning FHA out of reserves?

Update 11-14-2012: Mortgagee Letter 12-4 stipulates a small “statutory” increase of 10 basis points on Mortgages starting April 9, 2012.

Update 2-16-2011:  To quote a famous US President…”Well, there you go again”…FHA will be raising the annual Mortgage Insurance Premium (MIP) by .25, resulting in another $21/month based on a $100,000 FHA loan. (Sources: and

Effective April 9, 2010 those upfront (one time) premiums went from 1.75% to 2.25%. However, the FHA was not able to raise the annual premium without the permission of Congress as it was already at the authorized ceiling, so the up front rate remains at 1.75%. Under the law (H.R.5981) passed 6-10-2010, the FHA will be allowed to increase its annual premium to 1.50 percent of the unpaid balance of the loan.

Per FHA Commissioner David Stevens’ congressional testimony,  for new borrowers, the FHA will lower its upfront premium (from 2.25% to 1.0%) simultaneously with the increase to the annual premium (from .55% to .90%). It was FHA’s intention to implement that change effective on September 7, 2010 (but now has been delayed until 10-4-2010), FHA’s upfront mortgage insurance premium will be adjusted down to 100 basis points on all amortization terms and the annual mortgage insurance premium will increase to 85-90 basis points on amortization terms greater than 15 years.

Example:  Based on a $100,000 FHA loan, the new up front premium will be $1,000 (instead of $2,250) and the annual charge would probably be $900 (instead of $550).

The net overall difference is effectively an increase in taxes (to those people making less than $250,000 per year). Even though FHA plans to lower the upfront premium, the monthly MIP charge is going up over the minimum mandatory 5 years of payments – based on a $100,000 loan, it could mean more than $750 over 5 years. You may get a small break if they retain the MIP tax deductability…

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