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Not so great news from FHA

January 9th, 2017 8:07 PM by Sam Kader

Sorry guys as of Jan 20th - the rate reduction that was announced earlier has been suspended until further notice from the new administration.

HUD has announced in its Mortgagee Letter 2017-01 that as of January 27, 2017, all of FHA loans will be subjected to a lower Annual Mortgage Insurance Premium (MIP) savings home buyers and home owners thousands of dollars. Highlights of the changes:

  • The annual Mortgage Insurance Premium (MIP) is dropping by about 25 basis points which is close to pre-housing-crisis levels (see below table). FHA has included a table that reflects the new annual MIP rates charged for different mortgage terms and loan-to-value (LTV) ratios.
  • Affects purchase, refinance and streamline refinances.
  • In its revised annual MIP rate table, FHA has eliminated the annual MIP rate differentials by base loan amount, which both simplifies and standardizes the annual MIP rates charged for different mortgage terms and LTV ratios. 

Closing/Disbursement Date of January 27, 2017

Unlike previous annual MIP rate adjustments, the new annual MIP rates are being applied based on the Closing/Disbursement date of the mortgage and not on the FHA case number assignment date:

  • The Closing/Disbursement date is the later of the date of the signing of the mortgage or the date of disbursement of loan proceeds, as entered by mortgagees in the FHA Connection (FHAC) system.
  • Mortgagees with FHA cases in process do not need to request the cancellation of an existing FHA case number or obtain a new FHA case number to extend the annual MIP rate reductions to borrowers. The new annual MIP rates will be automatically applied based on the Closing/Disbursement date entered into FHAC by the mortgagee.

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