March 18, 2013
A reader asks, “My expected closing date is March 31, 2013. I see that there will be some new guidelines regarding PMI effective this year. Would I be required to pay private mortgage insurance until I have 20% equity and have paid PMI for five years or would I be required to pay PMI for the life of the loan?”
The FHA has issued guidance about its coming changes to the PMI structure and payments. This information is found in FHA Mortgagee Letter 2031-04. It says in part:
“FHA will increase its annual mortgage insurance premium (MIP) for most new mortgages by 10 basis points or by 0.10 percent. FHA will increase premiums on jumbo mortgages ($625,500 or larger) by 5 basis points or 0.05 percent, to the maximum authorized annual mortgage insurance premium. These premium increases exclude certain streamline refinance transactions.”
“FHA will also require most FHA borrowers to continue paying annual premiums for the life of their mortgage loan. Commencing in 2001, FHA cancelled required MIP on loans when the outstanding principal balance reached 78 percent of the original principal balance.”
These changes are due to take effect in April and June. The annual premium increase takes effect in April for all FHA loans with case numbers assigned on or after April 1 2013. No other FHA loans are affected except those with case numbers assigned on the change date.
The other MIP changes take effect as described below in the mortgagee letter:
“The following sections of this ML are effective for all mortgages with FHA case numbers assigned on or after June 3, 2013:
–revision to the period for assessing the annual MIP;
–removal of the exemption from the annual MIP for loans with terms of 15 years or less and LTVs of less than or equal to 78 percent at origination;
–increase in the annual MIP for mortgages with terms less than or equal to 15 years and LTV ratios less than or equal to 78 percent at origination.”
The answer to the reader questions is simple–if your FHA loan does not have a case number issued on or after the dates mentioned above, your FHA loan is not affected by the new changes. Discuss the specifics of your PMI obligations with the lender if you have further questions.
Do you have questions about FHA loans or refinance loans? Ask us in the comments section.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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