What is going on with FHA mortgage insurance?

We continue to receive multiple questions regarding the implementation date of FHA’s changes in the monthly mortgage insurance premium as well as the Up Front Mortgage Insurance Premium (UFMIP). As you may know, Congress passed H.R. 5981 which increased the statutory limit on monthly mortgage insurance 1.55 percent. This does not mean the monthly mortgage insurance premium will increase to 1.55 percent, but does mean HUD has the authority go to as high as 1.55 percent. Currently, HUD has the statutory authority to charge up to 3.0 percent on the UFMIP but only charges 2.25 percent.

A few days after the passage of H.R. 5981, Commissioner Stevens, Federal Housing Commissioner, released a statement which included the following:

"It is our intention that effective on September 7, 2010, FHA’s upfront mortgage insurance premium will be adjusted down to 100 basis points on all amortization terms and the annual mortgage insurance premium will increase to 85-90 basis points on amortization terms greater than 15 years². A Mortgagee Letter will be forthcoming once President Obama signs the bill into law…"

Notice the words “intention” and “mortgagee letter will be forthcoming”. A few days later, Deputy Assistant Secretary, Vicki Bott, released a statement, which included the following:

"Last week, FHA Commissioner David H. Stevens announced plans for implementing FHA’s new mortgage insurance premium structure. As we work to publish a Mortgagee Letter, it is our intention to announce that based on industry feedback and our desire to have this change implemented successfully in the marketplace, FHA will make the premium fee changes on all new case numbers effective October 4, 2010."

Again, notice “intention” and “as we work to publish a mortgagee letter.” In the release, Deputy Assistant Secretary Bott clarified that HUD’s intention was to simultaneously decrease the UPFMIP to 1.0 percent and increase the monthly MIP to 85-90 basis points on amortization periods over 15 years.

Bottom line…we still do not know the exact details of the change including the implementation date or the amount. We will post the final details as soon as we see the mortgage letter announcing the change.