FHA Annual MIP Rate and Duration Increases

FHA Single Family Annual Mortgage Insurance Premium (Annual MIP) changes were announced in Mortgagee Letter 2013-04 including:

• Annual MIP rate increases effective for case numbers assigned on or after April 1, 2013; and
• Annual MIP duration increases effective for case numbers assigned on or after June 3, 2013.

The Annual MIP on all forward mortgages will increase by 0.10 percent or 0.05 percent, except for streamline refinance transactions refinancing existing FHA loans endorsed on or before May 31, 2009.  The rates for these streamline transactions will remain at 0.55 percent Annual MIP and 0.01 percent Upfront MIP (UFMIP) as announced in ML 2012-4.

The increased duration of Annual MIP effective June 3, 2013, will be:

• 11 years for FHA loans with an initial loan-to-value ratio (LTV) of 90 percent or less.
• Full loan term for FHA loans with an LTV over 90 percent.

FHA mortgages with terms of 15 years or less and loan-to-value (LTV) ratios of 78 percent or less will be exempt from Annual MIP until June 3, 2013.

Related ConformX Changes

New ConformX Annual MIP and UFMIP data integrity checks have been added to support the new FHA premium rate structures that are effective April 1, 2013.

A ConformX software enhancement is in process to support the new 11 year Annual MIP term for loans with an LTV of 90 percent or less effective June 3, 2013.  A data integrity error for affected loans (FHA Case Number Assignment Date on or after June 3, 2013 with a starting LTV of 90 percent or less) will remain in place until the ConformX software enhancement is released, tentatively scheduled for the night of April 12, 2013.  A related ConformX software release announcement will be forthcoming.

The FHA Informed Consumer Choice Disclosure Notice (Cx41) will be modified twice in ConformX.  The first modification will be effective April 1, 2013, and will only involve increasing the “Monthly Mortgage Insurance Premium” amount in line 8 of the FHA example to “$107.87” to reflect the new Annual MIP rate of 1.35 percent.  The second modification will be effective June 3, 2013 (available May 1, 2013) and will include changing the “Maximum Number of Years of Monthly Insurance Premium Payments” in line 9 of the FHA example to “30 Years” and updating the “FHA Mortgage Insurance Premium Information” text to use new language released by FHA concerning the Annual MIP duration (see text below).

The FHA Important Notice to Homebuyers, HUD Form 92900-B (Cx40) will be modified effective June 3, 2013 (available May 1, 2013) to replace the text of the “Monthly Insurance Premiums” section on page 2.  The new language released by FHA will be used on both Cx40 and Cx41:

“In addition to an upfront mortgage insurance premium (UFMIP), you may also be charged a monthly mortgage insurance premium.  You will pay the monthly premium for either: 

• the first 11 years of the mortgage term, or the end of the mortgage term, whichever occurs first, if your mortgage had an original principal obligation (excluding financed UFMIP) with a loan-to-value (LTV) ratio of less than or equal to 90 percent; or 
• the first 30 years of the mortgage term, or the end of the mortgage term, whichever occurs first, for any mortgage involving an original principal obligation (excluding financed UFMIP) with an LTV greater than 90 percent.”

Summary

• FHA loans will continue to have an UFMIP of 1.75 percent.
• Streamline refinance transactions that are refinancing existing FHA loans that were endorsed on or before May 31, 2009, will continue to have an Annual MIP of 0.55 percent and an UFMIP of 0.01 percent.
• Annual MIP rates effective for case numbers assigned on or after April 1, 2013 are as follows:

* An Annual MIP rate of 0.45 percent will be effective June 3, 2013 for loans with an LTV less than or equal to 78 percent and loan term up to 15 years.

• The increased duration of Annual MIP effective June 3, 2013, will be:
  • 11 years for FHA loans with an initial loan-to-value ratio (LTV) of 90 percent or less.
  • Full loan term for FHA loans with an LTV over 90 percent.
• New ConformX data integrity checks to support the new rates have already been implemented.
• Software edits to ConformX to support the 11 year minimum Annual MIP term are in process.
• The Informed Consumer Choice Disclosure Notice (Cx41) and Important Notice to Homebuyers (Cx40) will be modified as needed to use new example values and Annual MIP text.

Mortgagee Letter 2013-04 can be viewed at: http://portal.hud.gov/hudportal/documents/huddoc?id=13-04ml.pdf 

If you have any questions or concerns about these changes, please contact Client Support at 1.800.497.3584.

March 24, 2013
DR 134131 and 134133
TW 70473 and 72231