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Refinance News | Refinance Share Statistics
News about refinancing programs, pricing and production. Stories about the H o m e
Affordable Refinance Program, H A R P 2.0 and other Making Home Affordable coverage.

FHA to Cut MIPs on Streamlined Refis

Seasoned loans eligible

March 6, 2012

By staff

The Federal Housing Administration said it will reduce mortgage insurance premiums on refinances of seasoned FHA loans and make it easier to qualify. The move contrasts a planned increase on premiums for new FHA borrowers.

The cost of the up-front mortgage insurance premium is being cut to 0.01 percent for FHA's Streamlined Refinance Program. In addition, the annual mortgage insurance premium is being reduced to 0.55 percent.

In order to qualify, the FHA loan needs to have an endorsement date on or before May 31, 2009. In addition, the loan must be current.

Additional underwriting won't be required on the refinances.

The lower fees go into effect on June 11.

"The president is taking another step to make refinancing easier for millions of Americans who have government-sponsored mortgages," a White House statement touted. "He's cutting fees -- to help families save money and make refinancing more attractive."

The premium reduction contrasts plans announced last month to raise up-front premiums on most other FHA loans by 75 basis points to 1.75 percent and increase annual premiums by 10 BPS. The rate increases were made in an effort to meet the "congressionally mandated two percent reserve threshold."

Mortgagee Letter 12-4 issued today outlined the higher annual premiums.

On non-jumbo loans with amortizations greater than 15 years, the premiums will be 120 BPS unless the loan-to-value ratio exceeds 95 percent, in which case the premium will be 125 BPS. For loans with terms no greater than 15 year, the premiums are 35 BPS and 60 BPS for mortgages with LTVs higher than 90 percent.

Annual premiums on jumbo FHA loans, which go into effect on June 11, are 25 BPS more.

Around 3.4 million borrowers with loans closed prior to June 2009 have a rate in excess of 5 percent. FHA borrowers who take advantage of the streamlined refinances announced today are expected to save an average of $3,000 a year.

"FHA's new discounted prices assume no greater risk to its Mutual Mortgage Insurance Fund and will allow many of these borrowers to refinance into a lower cost FHA-insured mortgage without requiring additional underwriting," FHA's notice stated.

Home-equity conversion mortgages are among the Title 1 loans that are not eligible for the lower mortgage insurance premiums.

At a press conference today, President Obama talked about the lower FHA premiums as well as compensation to veterans from the servicer settlement.

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