The Department of Housing and Urban Development (“HUD’) has reduced THE FHA annual premiums for new borrowers, effective January 26, 2015. Borrowers with case numbers assigned on and after that date will be eligible for the reduced annual mortgage insurance premiums. HUD has projected that the action will save more than two million FHA homeowners an average of $900 annually and spur 250,000 new homebuyers to purchase their first home over the next three years. The change was made possible by the fact that the FHA’s Mutual Mortgage Insurance Fund (MMIF) has improved.
For loans in the pipeline, FHA has indicated that it will permit lenders to cancel existing case numbers and assign new numbers so that borrowers who have yet to close on their loans may take advantage of the premium reduction. The change does not impact loans that have closed. However, it is expected that the reduced premiums will spur refinance action among existing borrowers.
The reduction impacts the rate for all Title II forward mortgages with terms greater than 15 years, except single family forward streamline refinance transactions that are refinancing existing FHA loans that were endorsed on or before May 31, 2009. The rates, as set forth in Mortgagee Letter 2015-01, reduce the MIP by .50%. For example for a loan of less than $625,000 and a loan to value of less than 95%, the MIP was reduced from 1.3% to .80%.