Today, FHA announced a new premium structure for FHA-insured single family mortgages: as of this spring, the annual mortgage insurance premium (MIP) will increase by 0.10 percent for loans under $625,500 and by 0.35 percent for loans above that amount; and upfront premiums (UFMIP) will increase by 0.75 percent.
While the new structure is expected togenerate more than $1 billion to the Mutual Mortgage Insurance Fund through the end of Fiscal Year 2013, these changes would have a minimal effect on homeowners. The increase to the upfront premium will cost new FHA borrowers only $5 more per month.
The increases in mortgage insurance premiums are important for protecting FHA’s capital reserves and encouraging the return of private capital to the housing market.
Last November, the annual independent actuarial study of FHA indicated that the FHA MMI Fund capital ratio remains positive at 0.24 percent. With new risk controls and premiums put in place by the Obama Administration, the independent actuaries predicted that the Fund will return to the Congressionally-mandated threshold of two percent by 2014. While additional risks remain for FHA as the economy continues its fragile recovery, the significant reforms and strong enforcement efforts undertaken by this Administration are already yielding profits for the fund – as well as putting FHA in a more favorable position for the future
As it has for nearly 80 years, FHA remains committed to ensuring that qualified home buyers have access to mortgage financing, while protecting its insurance funds and working in partnership with private mortgage lenders nationwide. The premium increases announced today are carefully targeted to achieve all of these objectives and contribute to the ongoing recovery of the housing market and broader economy.
Details on the new premium structure for FHA-insured single family mortgages will be posted in a Mortgagee Letter later this week.