FHA Mortgage Insurance Premium increase

Real Estate Agent with LoanCentral

On February 14th 2011, FHA Sent out a Mortgagee Letter # 11-10 regarding the Annual Mortgage Insurance Premium changes and guidance on how to prepare for the upcoming changes.

The purpose of the update from FHA was to introduce a ¼% increase in the ANNUAL Mortgage Insurance Premium. (This does not affect Reverse Mortgages)

The Effective Date of the increase is for any new Case #'s (new FHA Loans) assigned on or after April 18th, 2011

There are also new procedures for "requesting" case numbers by lenders and brokers such as LoanCentral on that same April 18th date.

If there are loans in process - there is an "Automatic" case number cancellation which will also be effective for all FHA loans not insured prior to April 18th.

Why is it getting more expensive?

The National Housing Act for ensuring that FHA's Mutual Mortgage Insurance Fund stays "financially sound"  was a concern throughout the housing crisis which started a few years ago. The legislators mandated in section 202 of this act, that it is imperative that this fund is strengthened to ensure that FHA will continue in its role of providing a home financing source to Americans even during periods of economic volatility, and to continue serving it's mission of helping underserved borrowers.

How will this affect your payment on FHA Loans?

Below you will see that the ¼% increase to the Annual Mortgage insurance premium will increase the payment in this example by $33 per month. There are no changes to the UPFRONT mortgage insurance on FHA Loans at this time. 

As you can see - It is anticipated that this increase will have minimal impact on borrowers but will significantly strengthen the capital position of the FHA insurance fund.

FHA MIP Changes

 Here's how we got there...

 FHA Matrix for MIP Changes

NOTE that while this increase affects most single family residences purchased or refinanced through FHA, there are some exceptions - please see your LoanCentral loan officer for a list of those exceptions. More at www.LoanCentral.com

The bottom line is that NOW is the time to buy before your payment increases if you want to lock in the current lower FHA insurance premiums. It's already MARCH!

Comments (1)

Victor Zuniga
Berkshire Hathaway Home Services California Properties - San Diego, CA

FHA buyers are going to have to invest more when buying a home. I think the FHA wants more from buyers to discourage them from just walking away because they don't have that much invested into the property.

Mar 01, 2011 07:24 AM