FHA Mortgage Insurance Changes: Do They Affect Refinance Loans?

This year, the FHA changed its rules for mortgage insurance premiums. According to the FHA official site, the changes included revising the period for assessing the annual mortgage insurance premiums, removing an earlier 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 increasing the annual MIP on all forward mortgages (except single family forward streamline refinance transactions that refinance existing FHA loans on or before May 31, 2009).

Now, according to the FHA official site, FHA guaranteed mortgage loans with FHA case numbers assigned on or after June 3, 2013, the FHA requires “the annual MIP for the maximum duration permitted under statute”.

How does it work? According to the FHA, “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.”

Additionally, “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.”

Note the language in these rule changes, applied to “all mortgages”.

Another round of changes involved increasing the Up Front Mortgage Insurance Premiums for all FHA “forward mortgages”  except for what the FHA terms, “single family forward streamline refinance transactions that are refinancing existing FHA loans that were endorsed on or before May 31, 2009”.

The amount of the higher UFMIP premiums depends on a variety of factors including how long the loan term is, the loan-to-value ratio, and the base loan amount.

FHA refinance loans are definitely affected by these changes--speak to your loan officer to learn how the new rules affect your transaction.

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