FHA Mortgage Insurance (MMI)           

On August 12, 2010, the President signed into law a bill that allows  the Secretary of Housing and Urban Development (HUD) additional flexibility regarding the amount of the premiums charged for Federal Housing Administration (FHA) single family housing mortgage insurance programs.

You may find information on FHA Mortgage insurance prior to October 4, 2010 at.  Mortgage Insurance Prior to 10/4/2010.

HUD has decided to raise the FHA annual premium and correspondingly lower the upfront FHA premium, except for Home Equity Conversion Mortgages (HECM), so that FHA is in a better position to address the increased demands of the marketplace and return the Mutual Mortgage Insurance (MMI) fund to congressionally mandated levels without disruption to the housing market. Based on the new authority, effective for FHA home loans for which the case number is assigned on or after October 4, 2010, FHA will lower its FHA upfront mortgage insurance premium (except for HECMs) simultaneously with an increase to the FHA annual premium which is collected on a monthly basis. This policy change will decrease upfront premiums for purchase money and refinance transactions, including FHA-to-FHA credit-qualifying and non-credit qualifying streamlined refinance transactions.

FHA Programs Not Affected by the Premium Changes

The FHA upfront and FHA annual premiums and the requirements described apply to all mortgages insured under FHA’s Single Family Insurance Programs except those listed below:

• - Title I

• - HOPE for Homeowners (H4H)

• - Section 247 (Hawaiian Homelands)

• - Section 248 (Indian Reservations)

• - Section 223(e) (declining neighborhoods)

• - Section 238(c) (Military Impact areas in Georgia and New York)

FHA Upfront Premiums

Effective for FHA loans for which the case number is assigned on or after October 4, 2010, for FHA traditional purchase and FHA refinance products, the FHA upfront premium, shown in basis points below, will be charged for all amortization terms. 

FHA Annual Premiums

Effective for FHA loans for which the case number is assigned on or after
October 4, 2010, FHA will increase the FHA annual premiums collected on a monthly basis. For FHA traditional purchase and FHA refinance products, the annual premium, shown in basis points below, is to be remitted on a monthly basis, and will be charged based on the initial loan-to-value ratio and length of the mortgage according to the following schedule:

The FHA annual premium for amortization terms equal to or less than 15 years remains unchanged and is collected according to the following schedule:

Cancellation of FHA’s Annual Mortgage Insurance Premiums

The cancellation policies previously defined remain unchanged.

First-Time Homebuyer with HUD-Approved Pre-Purchase Counseling

The National Housing Act, as amended by the Housing and Economic Recovery Act in 2008, authorizes upfront premiums of up to 3.00 except these premiums cannot exceed 2.75 percent for first-time homebuyers who complete HUD-approved pre-purchase counseling. Since the upfront premium rate of 1.00 percent remains below the statutory cap, no variable rate is provided for under this Mortgagee Letter for first-time homebuyers who receive HUD-approved counseling.

Home Equity Conversion Mortgage (HECM) Loans

Effective for all HECM loans for which the case number is assigned on or after
October 4, 2010, FHA will increase the annual premium which is collected on a monthly basis. This policy change will not affect the upfront premiums collected.

The annual premium, shown in basis points below is to be remitted on a monthly basis, and will be charged according to the following schedule: