Today, HUD released Mortgagee Letter 2017-01, announcing a reduction in the FHA annual mortgage insurance premium by 20-25 basis points across the board and eliminating MI surcharges on loans over $625,500 in high-cost areas. This announcement, sure to please originators across the country, comes on the heels of the FHA Mutual Mortgage Insurance Fund (MMIF) once again reaching its statutory-mandated reserve of 2% in 2016.
The premium cut goes into effect with closings/disbursements on or after January 27, 2017. This is a slight departure from typical FHA policy changes which are usually implemented by the date the case number is obtained. Note, the UPFRONT MI Premium (UFMIP) is not changing and remains at 1.75% for forward mortgages.
The new annual premiums, effective January 27th, are highlighted below.
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.
EFFECTIVE WITH FHA CASE NUMBERS ASSIGNED ON OR AFTER JUNE 11, 2012:
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!
It was announced yesterday that current FHA Chief, David Stevens, will leave the agency at the end of this month to head the Mortgage Bankers Association. Those of you that have been following the goings-on in the industry since the subprime debacle (and who hasn’t) will know that David is a strong and competent leader who has successfully guided the FHA through the toughest market in history. A huge increase in market-share coupled with a huge increase in default rate is a challenge that no sane mortgage lending executive would want to face, yet David tackled the Agency’s problems head-on. While the dragon is not yet slain – FHA still has some substantial money issues with the mutual mortgage insurance fund – the program is certainly on much more sound footing now than when Stevens took over in 2009, and he deserves credit for righting the ship.
Yes, there have been bumps in the road. Those of you who have followed me throughout 2010 know that I believe that the MIP changes, though necessary, could have been better handled. There was no sound logic to the April 2010 decision to raise the upfront MIP to 2.25% in a declining market rife with foreclosures, especially considering that the UFMIP is nearly always financed and, at the time of the policy change, the purchase market was artificially inflated due to the homebuyer tax credit. It was a knee-jerk reaction to a huge problem that was not well thought out, proving that crisis decisions do not generally breed good policy.
The October reduction in the UFMIP, coupled with an increase in the annual MI, was the logical solution from the start as it generates much more predictable revenue growth and has the added benefit of not raising the size of an insurance payout upon borrower default. Be that as it may, at the end of the day, it is through Stevens’ leadership that the FHA has managed to remain well-positioned as the product of choice in a still-uncertain mortgage lending world. I wish him the best as he assumes the position of industry advocate at the MBA. Godspeed, David – now more than ever the industry needs a well-respected voice advocating for prudence, temperance and tact in an increasingly restrictive regulatory environment.