Private Mortgage Insurance Requirements
“Does PMI not apply to borrowers making down payments of 20% and above?”
Regardless of what may have applied in the past, you’ll find that the FHA has changed the rules for PMI–all FHA home loans known as “forward mortgages” with case numbers assigned on or after June 3 2013 now have different requirements than previously approved FHA mortgages with case numbers issued prior to that date.
With the issuance of FHA Mortgagee Letter 2013-04, one portion of FHA PMI rules got rescinded or changed, and the FHA enacted new ones in their place.
The rescinded rules include the following changes as described in FHA Mortgagee letter 2013-04 which, “…rescinds the automatic cancellation of the annual MIP collection announced in MLs 2000-38 and 2000-46;
….rescinds ML 2011-35, under which mortgages with terms of 15 years or less and LTVs of less than or equal to 78 percent at time of origination were exempt from the annual MIP”
Under the rules established in 2013, the following changes apply to all FHA loans with case numbers assigned on or after June 3 2013:
“For all mortgages regardless of their amortization terms, (emphasis ours) 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.”
The FHA also changed the rules for loans with LTVs greater than 90%:
“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.”
The mortgagee letter includes the following note: “FHA calculates LTV as a percentage by dividing the loan amount (prior to the financing of any UFMIP) by the lesser of the purchase price (if applicable) or the appraised value of the home. For streamline refinances without appraisals, FHA uses the original appraised value of the property to calculate the LTV.”
Borrowers who need to know how these policy changes may affect the amount they pay over the course of the FHA loan should discuss PMI policy with a loan officer.
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