The FHA has issued clarification on FHA insured mortgages with terms of 15 years or less and a Loan To Value Ratio of less than 78 percent or less. FHA loans with case numbers assigned on or after April 18, 2011 are affected by this clarification, which refers to the cancellation of the annual mortgage insurance premium or MIP.
Earlier in 2011, the FHA issued Mortgagee Letter 2011-10 which clarified and updated FHA loan rules for MIP for affected FHA loan types. When it was issued, it did not address “forward” loans with terms 15 years or less as described above. According to the FHA, “Currently the annual MIP is canceled for mortgages with amortization terms of 15 years or less when the LTV reaches 78 percent.”
FHA Mortgagee Letter 11-35 was issued to let borrowers and lenders know, “Therefore, this Mortgagee Letter confirms that Annual Mortgage Insurance Premiums are not charged for all forward mortgages with amortization terms of 15 years or less, and LTVs at or below 78 percent at the time of origination”, information accidentally left out of the original revision to FHA loan MIP revisions in Mortgagee Letter 2011-10.
The new FHA guidance says, “Additionally, when the changes to the annual MIP were made to HUD Handbook 4155.2 through Mortgagee Letter 2011-10, Section 7.3.c was inadvertently left out of the list of affected topics.”
“Therefore, this Mortgagee Letter clarifies that the references to the automatic termination of MIP in Section 7.3.c of HUD Handbook 4155.2 will be updated to reflect that the annual MIP terminates for mortgages with amortization terms of 15 years or less when the LTV reaches 78 percent and that no annual MIP is charged when the initial LTV for such mortgages is at or below 78 percent.”
FHA says there are “no other changes” to Annual Mortgage Insurance Premiums, and there are “no changes to the Upfront Mortgage Insurance Premium (UFMIP).”