HUD Annual Mortgage Insurance Premiums On the Rise

Annual Mortgage Insurance Premiums Going Up

HUD has announced that in an effort to “strengthen the Mutual Mortgage Insurance Fund”, as of April 1, 2013, the Annual Mortgage Insurance Premiums will increase. Current Standard (3.5% down) MIP = 125 bps. New = 135 bps.

Also, under current FHA allowances, anyone who puts 22%+ down on a 15 year term is exempt from paying annual MIP. This exemption will now be removed, effective April 1, 2013. This new MIP amount is 45 bps.

Additionally, effective June 3, 2013, the period of time that the annual MIP will be assessed will increase dramatically: Previously, all loan terms were required to pay annual MI for a minimum 5 years or was cancelled upon hitting 78% LTV. Effective June 3, all FHA loan terms with less than 10% down payment (>90% LTV) are required to pay the annual MIP throughout the life of the loan or the first 30 years, whichever comes first. All terms with more than 10% down (<90% LTV) now must pay annual MI for the first 11 years of the term or the end of the term, whichever comes first.

Finally, HUD has also notified all lenders and potentially impacted institutions (as of 3/11/2013) about the effects of the sequester. Although no jobs have been furloughed as of this moment (due to the 30 day notice requirement to workers), HUD has stated that, “furloughs and reductions in systems maintenance and other areas may result in delays in processing mortgage insurance applications, origination, and servicing inquiries”.

It’s uncertain exactly how long the delays will be and when they’ll take effect. So, using your best judgment, be cautious when establishing closing dates on your FHA or HUD contracts and check with your lender.