When buyers are approved for FHA home loans, for Lebanon NH real estate or any other purchase, they are required to carry mortgage insurance. That includes both a monthly Mortgage Insurance Premium (MIP) and an Up Front Mortgage Insurance Payment (UFMIP). The Upfront Mortgage Insurance Premium payments go into an escrow account set up by the U.S. Treasury Department and the funds are used to protect the government in case the borrower defaults on the FHA loan.

HUD issued a press release earlier this week to announce changes to FHA mortgage insurance. The key changes are listed below. However, the ‘official’ mortgagee letter has not been released and should be published shortly.  It is expected to provide additional details/clarification.   The press release provided the following information:

Beginning April 1, 2012, upfront mortgage insurance premiums will be higher by 75 basis points, or 0.75%; and annual mortgage insurance premiums will be higher by 10 basis points per year, or 0.10%.  For borrowers with a loan size of $200,000, the new MIP will add $1,500 in one-time loan costs, plus an on-going, annual $200 increase in total mortgage insurance premiums paid.

On June 1, 2012, MIP will be updated again, increasing the annual MIP factor an additional 25 bps for loan amounts above $625,500.  Additional changes in regards to MIP on FHA Streamline Refinances are expected to occur in the June time frame.  Details on the exact changes will be described in the upcoming mortgagee letter.

This increase represents the FHA’s fourth such increase in the last two years.

All new FHA loans are subject to the increase which includes both purchases and refinances.  FHA is increasing its mortgage insurance premiums because, as an entity, FHA is insuring a larger percentage of the U.S. mortgage market than ever.

In 2006, FHA insured 2 percent of all purchase-money mortgages. In 2011, that figure jumped to 18 percent. Unfortunately, as FHA has insured more loans, it’s number of loans in default have climbed, too, forcing them to boost its reserves.

Please note these changes are for new loans.  The mortgage insurance premiums will not rise for loans already closed.

For more information on these and other changes call our very own Mortgage Professional.

Victoria Blodgett
Mortgage Advisor
Phone: 802.310.9413
Fax: 856-917-1385
NMLS# 179656