Get Ready to Change Your MIP Closing Speech
The Party is Over for FHA Borrowers Cancelling MIP
On January 31, 2013 the US Department of Housing and Urban Devlopment issued a letter to all approved mortgagees outlining a revision of FHA policies concerning cancellation of the annual Mortgage Insurance Premium (MIP) and increases to the the MIP. These increases are effective for case numbers assigned on or after April 1, 2013 with some exceptions that will be effective on or after June 3, 2013. In summary cancellation of MIP for most loans currently occurs automaticaly until the loan to value percentage reached 78% or can be requested when the loan to value percentage reaches 80%. Going forward any loan for 15 years or more where the loan to value at origination is between 78% and 90%, borrower will pay MIP for 11 years and any loan for 15 years or more where the loan to value at origination is greater than 90% will pay MIP for the term of the loan.
After April 1, 2013 attorneys explaining mortgage insurance to their clients will have to change their explanation so that they provide the correct information to their clients. In the vast majority of FHA loans, where borrowers typically "put down" the minimum 3.5%, there will be no cancellation of the mortgage insurance. FHA needs the money - THE PARTY IS OVER!