Next Monday January 26, 2015 FHA will experience a historical event in the history of FHA. For only the second time since the inception of FHA the FHA Monthly Insurance Premium (MIP) will be reduced. But before we give credit to the Obama Administration for the FHA MIP Being Reduced For Only 2nd Time In The History Of FHA, lets take a look at what the MIP factors have been since FHA came into existence.
As you can see from the chart above prior to September 1, 1983 the FHA Monthly Insurance Premium (MIP) was only a .50 factor. On September 1, 1983 FHA experienced it's first reduction in the MIP by eliminating it until July 1, 1991. By the way the reason FHA eliminated the MIP was because it incorporated it into the UpFront Premium and the factor was 3.8%. From July 1, 1991 until December 31, 2000 the MIP fluctuated was based on several Loan-To-Value (LTV) Categories which they established in those years, but none of them were higher than the original .50 MIP Factor.
On January 1, 2001 FHA eliminated all of the different LTV Categories and went back to a straight .50 MIP factor. However, on October 1, 2008, just before President Obama took office FHA reverted back to charging different MIP factors based on LTV whether the LTV was at or below a 95% LTV.
On October 4, 2010 the first significant increase to the FHA MIP factor took place when it increased form .50/.55 to .85/.90. Six months later it increase again to 1.10/1.15. In April 9, 2012 the MIP increased a third time to 1.20/1.25. and lasted about a year until at which time in April 1, 2013 the MIP was increased to its present 1.30/1.35 factors.
On January 26, 2015 we will experience the first decrease in the MIP factor in almost 24 years, and only the second time in the history of FHA, when the FHA MIP factor drops to .80/.85. This decrease in the FHA MIP premium was much needed, and hopefully will provide a boost to the current Housing Market. The Obama Administration has been applauded for taking this very necessary step to try to get the Housing Market back on track. However, if one is going to accept the pats on the back for doing the right thing, then one also needs to take responsibility for get us to the point we are at.
In the six years President Obama has been in office we have seen the FHA MIP factor increased 4 times, and even though it is being reduced on January 26th, it is still .25 bases points higher than when he took office. Some will look at this blog and label it as political. But I am not writing this blog to make a political statement. I am writing this blog to provide the history behind the FHA Monthly Insurance Premium (MIP), so we can see in black and white how we got to this point.
I am all for giving credit to the present administration for acknowledging a change needed to be made, but along with the credit the present administration needs to take responsibility for almost tripling the FHA MIP factor in just six years. I see the present administration taking bows for the FHA MIP Being Reduced For Only 2nd Time In The History Of FHA, but I do not see them saying anything about who was responsible for getting us to the point a reduction needed to be made. Take the credit, but man up and take responsibility for the four bad decisions to increase the FHA Monthly Insurance Premium (MIP) as well.
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Info about the author:
George Souto NMLS# 65149 is a Loan Originator who can assist you with all your #FHA, #CHFA, and #Conventional #mortgage needs in Connecticut. George resides in Middlesex County which includes #Middletown, #Middlefield, #Durham, #Cromwell, #Portland, #Higganum, #Haddam, #East Haddam, #Moodus, #Chester, #Deep River, and #Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com
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