Preliminary Note: According to Section 2133 of the Housing and Economic Recovery Act of 2008, beginning on October 1, 2008, and for a period of 12 months thereafter, a moratorium on FHA's implementation of its risk-based premiums policy, as described in ML 2008-16, will become effective. Accordingly, the contents of the article below apply only until September 30, 2008.

Effective with new FHA case number assignments on or after July 14, 2008, lenders must comply with FHA's risk-based premiums policy on one-to-four-unit single family mortgages for calculating upfront and annual mortgage insurance premiums, as described in detail in ML 2008-16. You may also find additional information, policy guidance and FAQs on the risk-based premiums policy here.

To calculate Upfront MIP (UFMIP) and Annual MIP, the mortgage premium matrices in ML 2008-16 must be used (exceptions apply for certain types of refinance programs). As shown below, ML 2008-16 provides one matrix for loan terms greater than 15 years and another for loan terms less than or equal to 15 years. The values in each one of the matrices are based on the borrower's Decision Credit Score (see ML 2008-16 for determining Decision Credit Score) and loan-to-value (LTV) ratio with the first value in the cell representing the rate for calculating UFMIP and the second value representing the rate for calculating the Annual MIP.

FHA Single Family Mortgage Insurance Upfront and Annual Mortgage Insurance Premiums (Loan Terms > 15 years) Effective as of July 14, 2008
All premiums are specified in basis points (0.01%)
Decision Credit Score (FICO)
LTV	850-680	679-640	639-600	599-560	559-500	499-300	NON- TRADITIONAL
? 90.00	125/50	125/50	125/50	150/50	175/50	175/50	150/50
90.01-95	125/50	125/50	150/50	175/50	200/50	N/A	175/50
> 95	125/55	150/55	175/55	200/55	225*/55	N/A	200/55
* A first-time homebuyer, with HUD-approved counseling, will pay only 200 basis points for the upfront mortgage insurance premiums.

 

FHA Single Family Mortgage Insurance Upfront and Annual Mortgage Insurance Premiums (Loan Terms <= 15 years) Effective as of July 14, 2008
All premiums are specified in basis points (0.01%)
Decision Credit Score (FICO)
LTV	850-680	679-640	639-600	599-560	559-500	499-300	NON- TRADITIONAL
? 90.00	100/0	125/0	125/0	150/0	175/0	175/0	150/0
90.01-95	100/25	125/25	150/25	175/25	200/25	N/A	175/25
> 95	125/25	150/25	175/25	200/25	225/25	N/A	200/25

 

In accordance with FHA's new risk-based premium policy, DocMagic, Inc. has added a new Mortgage Insurance Premium screen in both DocMagic for Windows and DocMagic Online. To activate the Mortgage Insurance Premium (MIP) screen, click on the "New Calculator" icon appearing next to the "Loan Amount" field under the "Terms" tab in DocMagic, as shown below.

The MIP screen will look like this:

At the top of the screen, enter the Base Loan Amount, which is the Total Loan Amount less UFMIP. Then, choose the type of method to be used to calculate UFMIP and Annual MIP from the drop-down menu (i.e., Risk-Based, Avg. Balance, or UW (Underwriter's) Shorthand). For a more detailed description of the different types of methods, click on the "More Info" link in the right-hand corner of the MIP screen.

If you select the Underwriter's Shorthand Method or Average Outstanding Balance method (click here to review article about these two methods), as depicted below, the percent field to the right of the "@" symbol will display 1.50%, but this field will be grayed out, prohibiting any changes to that field. To the right of the "equals sign," in the same line as the type of method selected and percent field, UFMIP will be automatically computed and displayed in that field. Note that DocMagic will automatically calculate the Annual MIP using 0.50% as a factor for loan terms greater than 180 months and 0.25% for terms less than or equal to 180 months. NOTE: No Annual MIP is required for loans with terms less than or equal to 180 months and with an LTV ratio of less than or equal to 90%.

If you select the Risk-Based Premiums method, you must then select the applicable percentage rate to be used (1.00%, 1.25%, 1.50%, 1.75%, 2.00%, or 2.25%) from the drop-down list in the percent field for calculating UFMIP. See screen shots below. Based on the percentage selected, UFMIP will then be automatically calculated. Note that Annual MIP will be calculated automatically based on the borrower's Decision Credit Score and LTV.

In this example, UFMIP is calculated based on the percentage rate of 1.75% selected.

Once UFMIP is calculated, you must indicate whether or not UFMIP will be financed. Note that when you first open the MIP screen, the box to the left of "Up-Front MIP Financed" is automatically checked (that's our default). Then, the UFMIP amount will appear in the column, and if there is any amount less than $1.00 (that is, some change or cents in the UFMIP amount), that amount will show in the "Amount Paid in Cash" column. (See Handbook 4155.1 REV-5, Ch. 1, Sec. 3, Par. 1-9(F)) If there is an amount less than $1.00, then the Loan Amount (with MI Financed) will equal the sum of the Base Loan Amount, plus Up-Front MIP Financed, but excluding the Amount Paid in Cash, as shown in the below screen shot. The Loan Amount (with MI Financed) will then populate in the Loan Amount field in the "Terms" tab of DocMagic once you hit the "OK" button.

If MIP will not be financed, uncheck the "Up-Front MIP Financed" box, and the total UFMIP amount will appear in the "Amount Paid in Cash" column. The Loan Amount will then be the same as the Base Loan Amount. Once you click "OK" in the MIP screen, the computed Loan Amount will populate into the Loan Amount field in the "Terms" tab. An example screen shot is set forth below.

In addition to populating the Loan Amount field in the "Terms" tab of DocMagic, if UFMIP is financed, DocMagic automatically writes the MIP Financed (MPF) charge and MIP Cash (MPC) amount, if applicable, directly to the "Charges/Fees" tab of DocMagic. If UFMIP is not financed, the total UFMIP amount will appear as MIP Cash in the "Charges/Fees" tab. See screen shots below.

UFMIP is financed with a remaining amount of less than $1.00, which is reflected as MIP Cash.

UFMIP paid in cash; not financed.

Please note that if you return to the MIP screen after clicking the "OK" button and make any changes to the method used to calculate UFMIP or the percentage used if Risk-Based is the method selected, the MIP-related charges that populated automatically under the "Charges/Fees" tab will display in red-colored font to indicate that the values are no longer correct, and you should delete the applicable row(s) of charges by right-clicking on the charge(s) displayed. Note, however, that if you check/uncheck the box next to "Up-Front MIP Financed" from what it was previously, the charges will not display in red-colored font although they will be incorrect. You should delete the applicable row(s) in the "Charges/Fees" tab, go back into the MIP screen, click "OK" after verifying that all field values are correct, and then go back into the "Charges/Fees" tab to obtain corrected values.

If you have any specific questions related to the contents of this article, please contact Customer Service, at (800) 649-1362.