FHA is increasing
the annual mortgage insurance premium in order to increase the reserves it has in its
Mutual Mortgage Insurance Fund (MMI), which it uses to pay claims for mortgages
that go into default. By law, FHA has to
have reserves in the MII of at least 2.0% of the loan it has insured, or $2.00
for every $100.00 in insured loans.
Today, FHA has about $1.44 in reserves for every $100.00 in insured
loans. The changes below should help FHA
increase their reserves to the 2.0% minimum required.
FHA is
increasing the annual mortgage insurance premium by up to 0.10% of the base
loan amount. The annual mortgage
insurance premium is paid monthly with your mortgage payment. The following chart illustrates the changes
based upon base loan amounts and loan to value ratio (LTV):
$200,000 x 1.20% = $2,400 / 12 = $200/month
$200,000 x 1.30% = $2,600 / 12 = $216.67/month
These changes will go into effect for all FHA Case numbers obtained on or
after June 3, 2013.
FHA Changes Annual MIP
Cancellation Policy
Until 2001, when you had an FHA mortgage, you paid your annual MIP for as
long as you had the mortgage. With
conventional mortgages, you are able to stop paying mortgage insurance once the
balance on your mortgage is at or below 80% of the sales price/value of the
home. Since you now have 20% equity in
the property, mortgage insurance is no longer necessary. In 2001 FHA made changes to the time periods
it collects mortgage insurance premiums to fall more into line with conventional
mortgage insurance premium. But, unlike
conventional mortgage insurance, FHA mortgage insurance remains in effect
throughout the entire term of the mortgage.
The chart below show the changes to the amount of time a borrower will be
paying their annual FHA mortgage insurance premium:
These changes should increase the reserves in the FHA MMI to the minimum
2.0% and keep FHA mortgage a viable option for future homeowners.
These changes will go onto effect for all FHA Case numbers pulled on or
after April 1, 2013.
If you have any questions or are interested in purchasing a home or refinancing,
your existing mortgage, please contact me at BarkerLoans@gmail.com or by phone at
708.473.7688.
