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FHA to Increase MI Insurance
FHA is Making the Following Changes to Bolster Capital
Reserves on New Case Numbers Filed on or After April 1, 2013 |
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- An increase in annual mortgage
insurance premiums (MIP) on most mortgages by
10 basis points or 0.10 percent. Premiums on jumbo
mortgages with balances of $625,000 or larger will
increase by 5 basis points or 0.05 percent. This
will bring jumbo mortgage premiums up to the maximum
premium authorized by Congress. These premium
increases exclude certain streamline refinance
transactions.
- FHA will reverse its existing policy of
cancelling MIP on loans when the outstanding
principal balances reached 78 percent of the
original balance. Homeowners will now be
required to maintain principal payments over the term of the loan.
- FHA will require lenders to manually
underwrite loans for which borrowers have a
decision credit score below 620 and a total
debt-to-income (DTI) ratio greater than 43 percent.
Lenders will be required to document compensating
factors that support the underwriting decision to
approve loans where these parameters are exceeded,
using FHA manual underwriting and compensating
factor guidelines.
- FHA will propose an increase in the
minimum down payments for jumbo loans from 3.5
to 5 percent. The proposal will be published in the Federal Register within the next few days.
- FHA will step up its enforcement
efforts for FHA-approved lenders with regard
to aggressive marketing to borrowers with previous
foreclosures. Borrowers are currently able to access
FHA-insured financing no sooner than three years
after they have experienced a foreclosure, but only
if they have re-established good credit and qualify
for an FHA loan in accordance with FHA's fully
documented underwriting requirements. FHA will work
with other federal agencies to address such false
advertising by non-FHA-approved entities.
- Finally, as discussed in its Annual Report
to Congress, FHA is also committed to structuring a new housing counseling initiative that would
apply to a number of borrower classifications,
including borrowers with previous foreclosures.
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The table below shows the previous and the new duration of annual MIP
by amortization term and LTV ratio at origination.
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Term |
LTV (%) |
Previous |
New |
≤ 15 yrs |
≤ 78 |
No annual MIP |
11 years |
≤ 15 yrs |
> 78 – 90.00 |
Cancelled at 78% LTV |
11 years |
≤ 15 yrs |
> 90.00 |
Cancelled at 78% LTV |
Loan term |
> 15 yrs |
≤ 78 |
5 years |
11 years |
> 15 yrs |
> 78 – 90.00 |
Cancelled at 78% LTV & 5 yrs |
11 years |
> 15 yrs |
> 90.00 |
Cancelled at 78% LTV & 5 yrs |
Loan term |
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The first table shows the previous and the new annual MIP rates by amortization term, base loan amount and LTV ratio. All MIPs in this table are effective for case numbers assigned on or after April 1, 2013.
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Term > 15 Years |
Base Loan Amt. |
LTV |
Previous MIP |
New MIP |
≤ $625,500 |
≤ 95.00% |
120 bps |
130 bps |
≤ $625,500 |
> 95.00% |
125 bps |
135 bps |
> $625,500 |
≤ 95.00% |
145 bps |
150 bps |
> $625,500 |
> 95.00% |
150 bps |
155 bps |
Term ≤ 15 Years |
≤ $625,500 |
78.01% - 90.00% |
35 bps |
45 bps |
≤ $625,500 |
> 90.00% |
60 bps |
70 bps |
> $625,500 |
78.01% - 90.00% |
60 bps |
70 bps |
> $625,500 |
> 90.00% |
85 bps |
95 bps |
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The second table shows the previous and the new effective annual MIP rates for loans with an LTV of less than or equal to 78 percent and with terms of up to 15 years. The new annual MIP for these loans is effective for case numbers assigned on or after June 3, 2013.
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Term ≤ 15 Years |
Base Loan Amt. |
LTV |
Previous MIP |
New MIP |
Any Amount |
≤ 78.00 % |
0 bps |
45 bps |
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The chart below is a sample of how much it will increase a 30 year FHA loan
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30 Years |
Before |
LTV >95% |
300,000 x .0125 = $3750 |
12 mnths = $ 312.50 |
After |
LTV >95% |
300,000 x .0135 = $4050 |
12 mnths = $ 337.50 diff (+$25.00 per month) |
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Kenton Becker,
Sr. Loan Officer
Phone: 206-686-8822
Cell: 206-423-2552
Fax: 206-309-4736
MLO/NMLS #123961
Email Me |
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Built on Knowledge, Commitment, and Trust Since 1988.
Celebrating 25 Successful Years in Business. |
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