August 15, 2013
The FHA rules for mortgage insurance changed when the FHA and HUD issued Mortgagee Letter 2013-04, which featured, “Revision of Federal Housing Administration (FHA) policies concerning cancellation of the annual Mortgage Insurance Premium (MIP) and increase to the annual MIP”.
All of the scheduled changes to the MIP rules have taken place. Among the major features of those changed rules? According to the introductory paragraphs of the FHA/HUD mortgagee letter:
“Consistent with FHAs ongoing efforts to strengthen the Mutual Mortgage Insurance Fund, FHA is:
- revising the period for assessing the annual MIP;
- removing the exemption from the annual MIP for loans with terms of 15 years or less and Loan to Value (LTV) ratios of less than or equal to 78 percent at origination; and
- increasing the annual MIP on all forward mortgages except single family forward streamline refinance transactions that refinance existing FHA loans that were endorsed on or before May 31, 2009 (see ML 2012-4).”
But since the time when this mortgagee letter was released, there has been some confusion over the FHA loan policies concerning MIP, prompting Carol J. Galante, Assistant Secretary for Housing to release an update titled, “Implementation of HUDs Mortgagee Letter on Cancellation of the Annual Mortgage Insurance Premium”.
This update states, “FHA is aware of issues related to the implementation of Mortgagee Letter 2013-04, Revision of Federal Housing Administration (FHA) Policies Concerning Cancellation of the Annual Mortgage Insurance Premium (MIP). Specifically, since the effective date of this Mortgagee Letter, some mortgages have been originated using incorrect Truth in Lending Act (TILA) disclosures and/or incorrectly prepared HUD 92900A/B forms. FHA has consulted with the Consumer Financial Protection Bureau (CFPB) regarding the impact of these issues on Regulation Z. If either error or both occurred in the origination of a mortgage, the mortgagee must resolve all errors as discussed below, before the mortgage would be eligible for FHA insurance.”
That is a very important factor for anyone who might be affected by a recent FHA loan application.
Borrowers who received incorrectly prepared HUD 92900-A/B forms or who had loans prepared with incorrect Truth In Lending Act disclosures may be contacted by their lenders to rectify the situation. If an issue or dispute with a lender arises because of one or both of these problems, borrowers should contact the FHA directly by calling 1-800 CALL FHA to get clarification on their rights and responsibilities.
In some cases the FHA is still reviewing the proper course of action needed to remain in compliance when incorrect Truth In Lending Act disclosures are made. Contact the FHA for the latest information regarding these issues.
Do you have questions about FHA home 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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