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FHA to Increase MI Insurance

FHA is Making the Following Changes to Bolster Capital
Reserves on New Case Numbers Filed on or After April 1, 2013

An increase in annual mortgage insurance premiums (MIP) on most mortgages by 10 basis points or 0.10 percent. Premiums on jumbo mortgages with balances of $625,000 or larger will increase by 5 basis points or 0.05 percent. This will bring jumbo mortgage premiums up to the maximum premium authorized by Congress. These premium increases exclude certain streamline refinance transactions.
FHA will reverse its existing policy of cancelling MIP on loans when the outstanding principal balances reached 78 percent of the original balance. Homeowners will now be required to maintain principal payments over the term of the loan.
FHA will require lenders to manually underwrite loans for which borrowers have a decision credit score below 620 and a total debt-to-income (DTI) ratio greater than 43 percent. Lenders will be required to document compensating factors that support the underwriting decision to approve loans where these parameters are exceeded, using FHA manual underwriting and compensating factor guidelines.
FHA will propose an increase in the minimum down payments for jumbo loans from 3.5 to 5 percent. The proposal will be published in the Federal Register within the next few days.
FHA will step up its enforcement efforts for FHA-approved lenders with regard to aggressive marketing to borrowers with previous foreclosures. Borrowers are currently able to access FHA-insured financing no sooner than three years after they have experienced a foreclosure, but only if they have re-established good credit and qualify for an FHA loan in accordance with FHA's fully documented underwriting requirements. FHA will work with other federal agencies to address such false advertising by non-FHA-approved entities.
Finally, as discussed in its Annual Report to Congress, FHA is also committed to structuring a new housing counseling initiative that would apply to a number of borrower classifications, including borrowers with previous foreclosures.

The table below shows the previous and the new duration of annual MIP
by amortization term and LTV ratio at origination.

Term	LTV (%)	Previous	New
≤ 15 yrs	≤ 78	No annual MIP	11 years
≤ 15 yrs	> 78 – 90.00	Cancelled at 78% LTV	11 years
≤ 15 yrs	> 90.00	Cancelled at 78% LTV	Loan term
> 15 yrs	≤ 78	5 years	11 years
> 15 yrs	> 78 – 90.00	Cancelled at 78% LTV & 5 yrs	11 years
> 15 yrs	> 90.00	Cancelled at 78% LTV & 5 yrs	Loan term

The first table shows the previous and the new annual MIP rates by amortization term, base loan amount and LTV ratio. All MIPs in this table are effective for case numbers assigned on or after April 1, 2013.

Term > 15 Years
Base Loan Amt.	LTV	Previous MIP	New MIP
≤ $625,500	≤ 95.00%	120 bps	130 bps
≤ $625,500	> 95.00%	125 bps	135 bps
> $625,500	≤ 95.00%	145 bps	150 bps
> $625,500	> 95.00%	150 bps	155 bps
Term ≤ 15 Years
≤ $625,500	78.01% - 90.00%	35 bps	45 bps
≤ $625,500	> 90.00%	60 bps	70 bps
> $625,500	78.01% - 90.00%	60 bps	70 bps
> $625,500	> 90.00%	85 bps	95 bps

The second table shows the previous and the new effective annual MIP rates for loans with an LTV of less than or equal to 78 percent and with terms of up to 15 years. The new annual MIP for these loans is effective for case numbers assigned on or after June 3, 2013.

Term ≤ 15 Years
Base Loan Amt.	LTV	Previous MIP	New MIP
Any Amount	≤ 78.00 %	0 bps	45 bps

The chart below is a sample of how much it will increase a 30 year FHA loan

30 Years
Before	LTV >95%	300,000 x .0125 = $3750	12 mnths = $ 312.50
After	LTV >95%	300,000 x .0135 = $4050	12 mnths = $ 337.50 diff (+$25.00 per month)

Kenton Becker,
Sr. Loan Officer
Phone: 206-686-8822
Cell: 206-423-2552
Fax: 206-309-4736
MLO/NMLS #123961
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