Mortgage Daily

Published On: August 29, 2017

The cost of mortgage insurance premiums on federally insured mortgages is going up in an effort to limit taxpayer exposure. But the change will impact few mortgages.

On home-equity conversion mortgages insured by the Federal Housing Administration, the initial mortgage insurance premium rate is being raised to 2.00 percent of the maximum claim amount.

Currently, the initial MIP is 0.50 percent on amounts of no more than 60 percent of the principal limit and 2.50 percent of amounts greater than 60 percent of the principal limit.

The Department of Housing and Urban Development outlined the updates Tuesday in Mortgagee Letter 2017-12.

The annual MIP, however, is being cut to 0.50 percent from 1.25 percent.

HUD noted that the changes are being made “to help sustain
the HECM program as a viable financial resource for aging homeowners and to strengthen the Mutual Mortgage Insurance Fund.”

But the higher premiums won’t impact many loans. Overall U.S. mortgage originations last year were around 8.0 million loans for approximately $2 trillion, while HECM production was just 0.05 million units for $0.015 trillion.

The Mortgage Bankers Association applauded the move by HUD.

“Reverse mortgages are an important financial product for our nation’s seniors, but the program needs to remain financially viable if it is to continue to offer its benefits into the future,” MBA President and Chief Executive Officer David H. Stevens said in a written statement. “MBA looks forward to continuing to work with policymakers on this issue and others to ensure the long term health of all FHA programs and improve the lending process for consumers and the industry alike.”

HECMs with FHA case numbers assigned on or after Oct. 2 are impacted by the change.

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