New mortgage insurance premiums that take effect next month on loans insured by the Federal Housing Administration have been released.
The new mortgage insurance premium structure was outlined in Mortgagee Letter 2010-28 from the U.S. Department of Housing and Urban Development.
HUD was granted authority to increase annual M.I. premiums through Public Law 111-229, which was signed by President Barack Obama on Aug. 12.
On borrowers whose loan-to-values are no more than 95 percent, HUD can charge an annual FHA premium of 1.5 percent of the remaining principal balance. The limit was increased from 0.50 percent.
On loans in excess of 95 percent LTV, HUD was authorized to boost the annual FHA premium to 1.55 percent, up from the prior limit of 0.55 percent.
“Although the law authorized HUD to go up to these amounts, HUD is not doing so at this time,” the letter stated.
Instead, HUD is lowering up-front premiums to 100 basis points on purchase and refinance transactions. But the annual premiums are being raised to 85 BPS on loans with LTVs up to 95 percent and 90 BPS for LTVs above 95 percent.
On loans with amortizations up to 15 years, the annual premiums will remain at 25 BPS for loans with LTVs higher than 90 percent. No annual premiums are charged on loans with LTVs at or below 90 percent.
The 200-basis-point up-front premium on home-equity conversion mortgages is not impacted by the increases. But HECM annual premiums are being increased to 125 BPS.
The premium changes do not affect Title I loans or the HOPE for Homeowners program.
There are no changes to FHA cancellation policies.
The new premiums impact loans with case numbers assigned after Oct. 3.
