FHA Announces Mortgage Insurance Premium Increase

The Department of Housing and Urban Development and the Federal Housing Administration will increase FHA Mortgage Insurance Premiums according to a press release dated February 27, 2012. The press release, HUD No. 12-037, states, FHA will increase its annual mortgage insurance premium (MIP) by 0.10 percent for loans under $625,500 and by 0.35 percent for loans above that amount. Upfront premiums (UFMIP) will also increase by 0.75 percent. The increases are scheduled take effect in stages--some changes happen in April 2012, while others take effect in June of 2012. The FHA will issue a mortgagee letter fully explaining the changes and how they affect new home loans on and after those dates. FHA mortgage insurance premiums may be going up, but according to the press release, the changes are not severe, adding to about five dollars per month for most new FHA home loans where applicable. The increased mortgage insurance costs are part of the Temporary Payroll Tax Cut Continuation Act of 2011, which requires FHA to increase the annual MIP. As stated previously, the FHA Up Front Mortgage Insurance Premium is also affected; the current rate of one percent will increase to 1.75 percent of the base loan amount. According to FHA.gov, This increase applies regardless of the amortization term or LTV ratio. FHA will continue to permit financing of this charge into the mortgage. This change is effective for case numbers assigned on or after April 1, 2012, The press release also adds, Borrowers already in an FHA-insured mortgage, Home Equity Conversion Mortgage (HECM), and special loan programs outlined in FHAs forthcoming Mortgagee Letter will not be impacted by the pricing changes announced today.