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FHA Mortgage Insurance

FHA has several kinds of Insurance funds. Depending on the type of property and the type of loan transaction, one or more of these insurance types may apply.

Mutual Mortgage Insurance (MMI): 

Applies to 1-4 unit houses and eligible PUD’s for both Fixed Rate and ARM transactions. (HUD program codes: 203b (fixed rate) and 251 (ARM). Within this MMI fund, there are 2 kinds of mortgage insurance that may apply to the transaction: Upfront MIP and Monthly MIP:

  • Upfront Mortgage Insurance (UFMIP) is the one time mortgage insurance premium collected at closing and is sent to HUD to insure the loan. Currently, UFMIP is calculated at 1.75 % X the base loan amount.  Please note that this may increased in 2010. See Mortgagee Letter 2010-28 at the bottom of this page.
  • UFMIP may be paid in cash at closing and may be paid by the Borrower, Seller, or Lender.
  • UFMIP may be financed in the mortgage amount. If financed, the UFMIP is added to the base loan amount to arrive at a greater “total” loan amount.
  • The total loan amount is the principal amount that the Borrower repays in the mortgage payment each month. The total loan amount may exceed FHA’s statutory (locality) lending limit only by the amount of the financed UFMIP.
  • The Borrower may obtain a partial refund of the UFMIP if the loan is refinanced to another FHA mortgage within the first 3 years of term. If the loan is paid off and/or not refinanced to another FHA mortgage, there will be no refund of the UFMIP.

ANNUAL PREMIUM (Monthly mortgage insurance):

  • In addition to the UFMIP, monthly mortgage insurance will be charged on all transactions where the term is more than15 years (prior to 04/17/11).
  • Monthly mortgage insurance is paid monthly (included in the Borrower’s monthly payment.) The amount charged will be determined by the LTV and the term of the loan.  If 15 years or less, and the LTV is under 90%, no monthly premium on loans closed prior to 04/17/11 per Mortgagee Letter 00-38.  Mortgagee Letter 2011-10 changed this effective 04/18/11.  See letter 11-10 below.
  • Monthly MIP may be canceled prior to payoff of loan. (For 30-year loans, MIP must be paid for 5 years and then canceled when LTV declines to 78%. For 15 year loans, MIP may be dropped when LTV reaches 78% - no specific number of payments must have been made.)

General Insurance Fund (GI):

  • Applies to 1 Unit Condo properties. Loan transaction may be for both Fixed rate and ARM products.
  • HUD program code is Section 234c (Condo-Fixed Rate) OR Section 251 (Condo- Arm Loan).
  • Monthly mortgage insurance is paid monthly in the Borrower’s mortgage payment. Servicer sends the payment to HUD on monthly basis.
  • Insurance is paid by Borrower for entire term of loan (regardless of the LTV).
  • Current monthly mortgage insurance is calculated by multiplying the base loan amount X .50% divided by 12.
  • Borrower receives NO refund on this type of insurance when the loan is paid in full.
  •  

Mortgage Letter 2010-28 Follows: (UFMIP)

 

U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
WASHINGTON, DC 20410-8000


September 1, 2010

MORTGAGEE LETTER 2010-28


TO: ALL APPROVED MORTGAGEES


SUBJECT: Changes to FHA Mortgage Insurance Premiums


On August 12, 2010, the President signed into law, Public Law 111-229, which provides the
Secretary of Housing and Urban Development (HUD) with additional flexibility regarding the
amount of the premiums charged for Federal Housing Administration (FHA) single family housing
mortgage insurance programs. Specifically, the new law permits HUD to increase the amount of
the annual mortgage insurance premium that HUD is authorized to charge. For mortgages
involving an original principal obligation of less than or equal to 95 percent of the appraised value
of the property, the amount of the authorized annual premium is increased to 1.5 percent (from .50
percent) of the remaining insured principal balance. For mortgages involving an original principal
obligation that is greater than 95 percent of the appraised value of the property, the amount of the
authorized annual premium is increased to 1.55 percent (from 0.55 percent) of the remaining
insured principal balance. Although the law authorized HUD to go up to these amounts, HUD is
not doing so at this time, as described below. The Act authorizes HUD to adjust the amount of the
annual mortgage insurance premiums through Federal Register Notice or Mortgagee Letter.

HUD has decided to raise the annual premium and correspondingly lower the upfront
premium, except for Home Equity Conversion Mortgages (HECM), so that FHA is in a better
position to address the increased demands of the marketplace and return the Mutual Mortgage
Insurance (MMI) fund to congressionally mandated levels without disruption to the housing market.
Based on the new authority, effective for FHA loans for which the case number is assigned on or
after October 4, 2010, FHA will lower its upfront mortgage insurance premium (except for
HECMs) simultaneously with an increase to the annual premium which is collected on a monthly
basis. This policy change will decrease upfront premiums for purchase money and refinance
transactions, including FHA-to-FHA credit-qualifying and non-credit qualifying streamlined
refinance transactions.


Programs Not Affected by the Premium Changes

The upfront and annual premiums and the requirements described in this Mortgagee Letter
apply to all mortgages insured under FHA's Single Family Insurance Programs except those listed
below:
           - Title I
           - HOPE for Homeowners (H4H)
           - Section 247 (Hawaiian Homelands)
           - Section 248 (Indian Reservations)
           - Section 223(e) (declining neighborhoods)
           - Section 238(c) (Military Impact areas in Georgia and New York)

Upfront Premiums

Effective for FHA loans for which the case number is assigned on or after
October 4, 2010, for FHA traditional purchase and refinance products, the upfront premium, shown
in basis points below, will be charged for all amortization terms.

       Mortgage Type                                                  Upfront Premium Requirement
Purchase Money Mortgages and Full-Credit                           100 BPS
Qualifying Refinances
Streamline Refinances (all types)                                             100 BPS

Annual Premiums

Effective for FHA loans for which the case number is assigned on or after
October 4, 2010, FHA will increase the annual premiums collected on a monthly basis. For FHA
traditional purchase and refinance products, the annual premium, shown in basis points below, is to
be remitted on a monthly basis, and will be charged based on the initial loan-to-value ratio and
length of the mortgage according to the following schedule:

             LTV                            Annual Premiums for Loans > 15 Years
= or < 95 percent                                             85 BPS
>95 percent                                                     90 BPS

The annual premium for amortization terms equal to or less than 15 years remains unchanged and is
collected according to the following schedule.

           LTV                            Annual Premiums for Loans = or < 15 Years
= or < 90 percent                                               -None-
>90 percent                                                        25 BPS

Cancellation of FHA's Annual Mortgage Insurance Premiums

The cancellation policies defined in Mortgagee Letters 2000-38 and 2000-46 remain
unchanged.


First-Time Homebuyer with HUD-Approved Pre-Purchase Counseling

The National Housing Act, as amended by the Housing and Economic Recovery Act in
2008, authorizes upfront premiums of up to 3.00 except these premiums cannot exceed 2.75 percent
for first-time homebuyers who complete HUD-approved pre-purchase counseling. Since the
upfront premium rate of 1.00 percent remains below the statutory cap, no variable rate is provided
for under this Mortgagee Letter for first-time homebuyers who receive HUD-approved counseling.

Home Equity Conversion Mortgage (HECM) Loans

Effective for all HECM loans for which the case number is assigned on or after
October 4, 2010, FHA will increase the annual premium which is collected on a monthly basis.
This policy change will not affect the upfront premiums collected.

The annual premium, shown in basis points below is to be remitted on a monthly basis, and
will be charged according to the following schedule:

      Premium Type                            Basis Points
Upfront                                             200 BPS
Annual                                              125 BPS

If you should have any questions concerning this Mortgagee Letter, please call the FHA
Resource Center at 1-800-CALLFHA (1-800-225-5342). Persons with hearing or speech
impairments may access this number via TDD/TTY by calling 1-877-TDD-2HUD (1-877-833-
2483).

Sincerely,


David H. Stevens
Assistant Secretary for Housing-
Federal Housing Commissioner

 

Mortgage Letter 2011-10 Follows:


DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

WASHINGTON, DC 20410-8000


ASSISTANT SECRETARY FOR HOUSING-
FEDERAL HOUSING COMMISSIONER


Date: February 14, 2011

To: All Approved Mortgagees

Mortgagee Letter 11-10


Annual Mortgage Insurance Premium Changes and Guidance on Case Numbers

This Mortgagee Letter introduces a 25 basis point increase to the Annual Mortgage
Insurance Premiums for forward mortgage amortization terms. It also provides
guidance on the validity period of case numbers and new requirements for requesting
them.

The increase in Annual Mortgage Insurance Premiums for forward mortgage
amortization terms is effective for case numbers assigned on or after April 18, 2011.

The new procedures for requesting case numbers are effective on April 18, 2011.
Automatic case number cancellation is effective for all case numbers not insured
prior to April 18, 2011.

The topics summarized on the following pages were created as a result of these
changes in premiums and case number guidance. Below is a list of the blocks in the
subject handbook that are affected and the changes will be integrated into the FHA
Single Family On-Line Handbooks shortly.

HUD 4155.2 Lender's Guide to Single Family Mortgage Insurance Process
1.D.3.a, Requesting an FHA Case Number
1.D.4.b, Automatic Case Number Cancellations by the System
1.D.4.c, Reinstatement of Case Numbers
7.3.e, Reference Chart: UFMIP and Annual MIP for Mortgages with Terms More
Than 15 Years
7.3.f, Annual Premiums for Mortgages with Terms More Than 15 Years
7.3.g, Reference Chart: UFMIP and Annual Premiums for Mortgages with Terms
Less Than 15 Years
7.3.h, Annual Premiums for Mortgages with Terms Less Than 15 Years (new)

Given the legislative mandate in section 202 of the National Housing Act for
ensuring that FHA's Mutual Mortgage Insurance Fund (MMIF) remains financially
sound, it is imperative that the MMIF is further strengthened to ensure that FHA will
continue its historic role of providing a home financing vehicle during periods of
economic volatility and its mission of helping underserved borrowers.

The charts below illustrate the 25 basis points (bps) increase in the Annual Mortgage
Insurance Premiums
. There are no changes to the Upfront Mortgage Insurance
Premium (UFMIP). It is anticipated that this increase will have minimal impact on
borrowers but will significantly strengthen the capital position of the MMIF.

The increase in the Annual Mortgage Insurance Premiums for forward mortgage
amortization terms is effective for case numbers assigned on or after April 18, 2011.

Mortgage Insurance Premiums
Loans > 15 years

             UFMIP = 100 bps                                                  Annual Premium
                  LTV                                           Through 4/17/2011*         On/After 4/18/2011**
         <95.00 percent                                             85 bps                                     110 bps
         > 95.00 percent                                            90 bps                                     115 bps

                                                               Loans 15 years

            UFMIP = 100 bps                                                     Annual Premium
                 LTV                                                Through 4/17/2011*         On/After 4/18/2011**
        <90.00 percent                                               None                                          25 bps
       > 90.00 percent                                              25 bps                                         50 bps

*For case numbers assigned on/before April 17, 2011
**For case numbers assigned on/after April 18, 2011


Note: This increase applies to all mortgages insured under FHA's Single
Family Mortgage Insurance Programs except

Title I
Home Equity Conversion Mortgages (HECM)
HOPE for Homeowners (H4H)
Section 247 (Hawaiian Homelands)
Section 248 (Indian Reservations)
Section 223(e) (Declining Neighborhoods)
Section 238(c) (Military Impact areas in Georgia and New York)

Reference: For information on automatic cancellation of Annual Mortgage
Insurance Premiums, see HUD Handbook 4155.2, 7.3.c

Case numbers should be requested and cancelled in accordance with prudent
business practices and existing guidance. Mortgagees are reminded that they
must: request case numbers only when they have an active loan application for
the subject borrower and property in accordance with HUD Handbook
4155.2 1.A.2, and/or request cancellation of case numbers in accordance with HUD Handbook
4155.2, 1.D.4.a.

Effective April 18, 2011, FHA Systems will require mortgagees to
certify at the time of requesting a case number that they have an active
loan application for the subject borrower and property and they must
provide the subject borrower's name and social security number for all
new construction (i.e., proposed construction and existing construction less
than one year old).

Note: See Appendix I of this Mortgagee Letter for a screen shot of the
system enhancement.

Beginning April 18, 2011, FHA systems will automatically cancel any
uninsured case number where there has been no activity for 6 months since
the last action except for:

loans where an appraisal update has been entered, and/or
loans where the Upfront Mortgage Insurance Premium (UFMIP) has been
received

Last action includes

  • case number assigned,
  • appraisal information entered,
  • firm commitment issued by FHA
  • insurance application received and subsequent updates, and
  • Notice of Return and resubmissions

Last action does not include updates to borrower names and/or property
addresses. For example, making changes to the number of borrowers on the
loan will not reset the 6 month timeframe for automatic cancellation.

To prevent automatic cancellation of case numbers for which mortgage
insurance will be sought, mortgagees must enter appraisal information,
successfully transmit insurance application, etc.

Notes:
This automatic cancellation is applicable to case numbers assigned prior to
April 18, 2011, including case numbers for new construction, HUD Homes
and HECM.

References:

  • For information on when to enter appraisal information into FHA
    Connection, see Mortgagee Letter 2010-15.
  • For information on when case numbers are automatically cancelled after
    receiving UFMIP, see HUD Handbook 4155.2, 7.2
  • For reports on case numbers that will be automatically cancelled the
    following month, access FHA Connection/Single Family
    Origination/Origination Reports [See Appendix I for example of report].
    This report will be available for downloading into Microsoft Excel.

Case numbers that were automatically cancelled, including case numbers
for condominium units, will not be re-instated unless

  • the mortgagee provides evidence that the subject loan closed prior to
    cancellation of the case number, such as a HUD-1 Settlement Statement, or
  • the mortgagee provides evidence that not reinstating the case number
    causes an undue hardship to the borrower that is unrelated to recent
    changes to premiums and underwriting requirements.

Attached is an appendix that provides examples of the system enhancements
for requesting case numbers as well as a case number report. (See This on the HUD site)

Please address any questions about the topics in this Mortgagee Letter to the FHA
Call Center at 1-800-CALLFHA. Persons with hearing or speech impairments may
reach this number via TDD/TTY by calling 1-877-TDD-2HUD (1-877-833-2483).


David H. Stevens
Assistant Secretary for Housing-Federal Housing Commissioner

 

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