On Friday HUD released its first Mortgagee Letter for 2015, and it was a substantial change for the better. HUD has announced a 50 bps reduction in the amount of mortgage insurance that is paid on a monthly basis when securing a home with an FHA loan. This 50 bps equates to a 38% decrease in the amount borrowers have to pay every month in MIP. HUD had raised this MIP to 135 bps in April of 2013; and, in some people’s opinion, made the product very expensive. Therefore, FHA has been losing market share to Fannie Mae ever since.
This ML is effective for case numbers assigned on or after January 26, 2015.
The following table shows the existing as well as the new annual MIP rates by amortization term, base loan amount, and Loan-to-Value (LTV) ratio. All new MIP amounts set forth in this table are effective for case numbers assigned on or after January 26, 2015.
For example, a $225k FHA loan would currently require monthly MI in the amount of $253.13 per month. Under the new guidelines, that payment drops to $159.38 per month. That is a $93.76 per month savings to the consumer!
There is more good news! Current FHA loan holders can take advantage of this savings by refinancing their current FHA loan into a new one while simultaneously taking advantage of current low rates and the ability to lower the MI payment by 38%.
Smartly, HUD included a window to cancel any current case numbers associated with the higher MI payments so that buyers who were about to close on a new house could take advantage of this savings.
‘To allow mortgagees to obtain the reduced annual MIP rates contained in this ML for loans in process with active FHA Case Numbers, FHA will temporarily approve cancellation requests for active FHA Case Numbers within 30 days of the effective date of this ML.
FHA will provide operational details on case cancellations through FHA Info notifications and on FHA’s lender information page available at www.hud.gov/lenders.’
If you would like more information about this change and to find out if it can benefit you, please call our FHA hotline number at 512-368-9100 or feel free to email me at John.McClellan@SupremeLending.com
John E. McClellan NMLS#207768 Supreme Lending 3420 Executive Center Dr #300 Austin, TX 78731