This morning, HUD released mortgagee letter 12-04, formally announcing the MIP changes discussed in our last blog post.  There is one addition that I need to tell you about, and it only deals with FHA STREAMLINE REFINANCES.


If you are originating a streamline refinance and paying off an existing FHA loan that was endorsed for insurance on or prior to May 31, 2009, the UFMIP on the new loan will decrease to 0.01% of the new base loan amount, and the annual MIP (paid monthly) will decrease to 0.55%.  Some industry groups have already lodged an inquiry with HUD as to why the May 31, 2009, date was chosen.  If we get an answer to that question, I’ll be sure to let you know. 

Additionally, the effective date for the increases to the up-front and annual MIP that was discussed in our last blog post has been changed.  The first increase for all loans will now be effective with case numbers assigned on or after APRIL 9, 2012, and the additional increase for high-balance FHA loans will now be effective with case numbers assigned on or after JUNE 11, 2012.

Let’s get the word out!  Pick up the phones, close some loans, and (as always) happy originating!


  1. I too, wonder why the date in 2009 was chosen. This hurts others that had loans originating later when trying to take advantage of the low refi rates at the moment. The MIP being so much higher cancels out any advantages we would have to do it. Makes no sense………….. Our MIP would almost triple from where it is now……. 😦 Not sure how that would help us………..

    • They are offering this to people who are more severely underwater and with a significantly higher interest rate. If you closed on a loan after may 2009, chances are you are not too much underwater (if at all) AND you have a reasonable/affordable interest rate.

  2. Stephanie, as an originator, I completely understand your position. I’ve funded many MANY FHA loans over the course of the last few years that, but for the MIP situation, would be perfect candidates for the streamline.

    A few days ago, I was (again) pondering the date issue, and then it hit me. What is the length of the UFMIP refund window? 3 years. Coincidence? I think not. Now, I have no confirmation from HUD that this is the reason behind the decision, but it only makes sense from their perspective, right? You’re trying to stabilize the mutual mortgage insurance fund (MMIF) with higher premiums on all loans EXCEPT certain streamlines where you’re lowering the UFMIP to HECM-saver levels. It doesn’t make financial sense to have to pay out refunds of unearned premium on refinances where the new UFMIP will not recoup the amount paid out.

    Thanks for commenting and best wishes for continued success!

  3. Peter I highly agree that the 5/31/09 date was chosen because of the current 3 year MIP refund schedule. While there’s certainly a need for HUD to balance the books, often I wish they would use a bit more logic. It doesn’t make any sense to encourage 1 group to refinance while requiring others to pay even higher premiums.

    • Yes, this date is great for financial institutions but what about us the victims of this mortgage mess. I bought my house on December 2009 and now my mortgage is under water, my house lost half of its value and I have no option to refinance, get a principal reduction, or any sort of help. I guess the only option I have is to walkway from that property. I hope this mess gets sort out one day.

      thanks for sharing this info.

  4. So if I am correct, for a streamline FHA refinance the minimum years of PMI starts over right? An additional 5 years is definitely required? (assuming a new 30 year fixed of course).

    The problem with this is for loans starting after May 31st, 2009. The existing .55 annual PMI gets creamed up to 1.20. The increase would be okay if the years of PMI were based on the first FHA loan but it’s not right? The years of required PMI payments start right over?

  5. Matt, you are correct. An FHA streamline refinance with a 30 year term will carry the annual MIP for a minimum of 5 years. One of the biggest criticisms that HUD is receiving is that the UFMIP and annual MIP hikes have (in your terms) “creamed” the streamline refi market as it’s very difficult to find the required 5% savings in principal, interest and mortgage insurance. The reduction in MIP for streamlines prior to June 1, 2009 has been hailed by most as a step in the right direction, however it doesn’t cover the segment of the market who have loans that were insured after that date. As I mention in a comment above, my personal belief is that the policy has to do with the 3 year MIP refund schedule. That said, knowing the cause behind a policy doesn’t help those affected by it.

    HUD is faced with a need to bring the depleted reserve fund back up above the 2% statutory minimum but, as I mentioned in last year’s CE class, they also want to reduce their market share and focus on their core clientele at the same time. The premium increases have begun to reduce their business, but I would suspect (I haven’t seen data yet) that the overall loan quality on newly-insured loans is dramatically lower than it has been in the recent past. Why? Simple – because the highly qualified are moving away from FHA loans into conventional loans with PMI. With a DU approval, I can close a Fannie loan on a 1-unit owner-occupied purchase at 97% LTV and, with a very strong FICO score, pay less in monthly premium than I would on a comparable FHA loan and without having to pay the UFMIP! The lower-FICO borrower can’t do that and ends up in the FHA product. It’s true that serving the underserved was the intent of the FHA program, but the unintended consequence of these recent changes may actually be a higher FHA overall default rate. Defaults lead to claims that are paid out of, you guessed it, the very fund that HUD is trying to bolster with the increased premiums. I get that HUD wants to move away from the supremely-qualified borrower, and rightfully so, but I think that doing so now is premature and may actually do more harm than good.

  6. Peter, I love your input on the fha streamline ! This makes perfect sense, and yes it was nearly impossible to battle the rising MI premiums and meet the minimum net tangible benefit to the borrower. Praise the lord, FHA is finally catching on!

  7. Peter, Do you think the May 31st 2009 endorsment date will ever be changed while rates are still low? I am a perfect canidate for this program accept that although my original FHA loan “closed” several weeks before May 31st, 2009,, it did not get “endorsed” until 13 days after May 31st, therefore making me inelgible. Is it a false hope to think that they may actually start pushing this date out as the older “qualifying” canidates move through the system?

    • Brad, you’re certainly not alone – that’s the 4th time I’ve been asked that question this week! I’m hopeful that HUD will move that endorsement date forward, but I’ve no knowledge of plans to do so. Trying to predict what adustments a Federal agency will make to its consumer-facing policies is a difficult task at any time, but neigh-on impossible in an election year. I think there’s a chance that an expansion of the FHA streamline refinance could come as part of a larger homeowner-assistance program dealing with non-agency (non-Fannie/Freddie) loans as we get closer to November, but there is a lot of debate about exactly what kind of power the Executive Branch has to implement that larger program without Legislative Branch support/authorization. Either way, a lot depends on the economic releases in the next month or so, starting with tomorrow’s non-farm payroll report. I realize this response is about as clear as mud, and I wish I had a concrete answer for you, but such is the future of everything mortgage-related these days it seems. The Consumer Financial Protection Bureau is the equvalent of the Sword of Damocles hanging over the industry until we actually know what is going to be in all of the new regulations they’re planning on proposing in the next couple of weeks.

      • Peter, any new information regarding moving the endorsment date? I’m still hoping this may happen. I continue to get a flood of refi solicitations each week.

  8. we are looking into it. Dissappointed that we would have to pay MIP again! I understand that with the streamline the MIP is only for one year? Does anyone have experience with dropping their MIP after the one year of being in a refi ? Is it a hassle or is it done automatically? We really won’t be saving much just about $85.00 a month…but the MIP is $47 so that would mean after the first year we would save $137.00…am I thinking right? We are mid 50s and would like to continue paying what we pay now so hopefully we could pay off the 20 yr refi in 15 years. Thanks for your help.

    • Kim:

      Thanks for your comment! As it currently stands, your annual MIP (paid monthly) will last for a minimum of five years on any new FHA loan with a term greater than 15 years. It will cancel when the loan-to-value ratio reaches 78% AND payments have been made for a minimum of five years. For terms of 15 years or fewer, the annual MIP will cancel when your loan balance reaches 78%, regardless of the length of time the MIP has been paid. Note that, in order to complete a streamline refinance transaction, FHA requires that you save a minimum of 5% on your monthly mortgage payment (defined as the portion going towards principal, interest and mortgage insurance).

      I hope this information is useful to you. Don’t forget to contact your mortgage professional with those transaction-specific details, as that person knows your individual situation, whereas I can only speak in generalities.

      Happy Holidays!


  9. Silly question, likely, but I am having a hard time wrapping my mind around this.

    I had an FHA ARM originated in November 2008. I did a streamline refi to a fixed rate loan of 4.75 in October of 2009. The original loan date changed when I did the streamline, right? Therefore making me ineligible to benefit from the MIP changes?

    Pretty sure I know the answer. This reminds me an awful lot of the $7500 “tax credit” that was a “loan” the month I closed, and became $8000 of free money less than 60 days later. 😦

    • Lisa, you are correct that the original loan date did change when you refinanced. That makes you ineligible for the special FHA streamline refinance that was mentioned in this blog post. Trust me, I sympathize with your frustration, as I hear from similarly-situated people almost daily.

What are you thinking?

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s