September 30, 2014
A reader asks, “Mortgage companies have kept sending letters/emails, saying ‘You no longer pay MIP because FHA MIP policy has been changed since May 2014. You have paid unnecessary MIP payments because since you has refinanced for your home 2012.'”
“I refinanced my home mortgage through FHA in Mar.2012 and since then I have paid MIP until principal reach less than 78%. It will be by 2019 according to my mortgage company. Can you clarify ‘Revision of Federal Housing Administration (FHA) policies concerning cancellation of the annual Mortgage Insurance Premium (MIP) and increase to the annual MIP’? Dose cancellation of MIP mean ” home buyers who apply finance through FHA do not need to pay MIP? Should I stay with my current mortgage or refinance?”
This reader question refers to FHA Mortgagee Letter 2013-04, which announced changes to the FHA Mortgage Insurance policy.
The FHA is NOT cancelling its mortgage insurance requirement as suggested in the reader question.
The FHA Mortgagee letter, titled “Revision of Federal Housing Administration (FHA) policies concerning cancellation of the annual Mortgage Insurance Premium (MIP) and increase to the annual MIP” includes the following information from the FHA regarding how long FHA borrowers will pay MIP depending on the nature of their loan:
“For loans with FHA case numbers assigned on or after June 3, 2013, FHA will collect the annual MIP for the maximum duration permitted under statute.
For all mortgages regardless of their amortization terms, any mortgage involving an original principal obligation (excluding financed Up-Front MIP (UFMIP)) less than or equal to 90 percent LTV, the annual MIP will be assessed until the end of the mortgage term or for the first 11 years of the mortgage term, whichever occurs first.”
For any mortgage involving an original principal obligation (excluding financed UFMIP) with an LTV greater than 90 percent, FHA will assess the annual MIP until the end of the mortgage term or for the first 30 years of the term, whichever occurs first.”
Borrowers who are unsure how this applies to them should discuss their concerns with a loan officer to get further clarification. As for the borrower’s final question, refinancing is an important personal decision that’s best left to the borrower to research and choose accordingly.
Do you have questions about FHA home loans or refinance loans? Ask us in the comments section.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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