Pursuant to Section 2133 of the Housing and Economic Recovery Act of 2008, effective October 1, 2008, and for a period of 12 months thereafter, FHA's implementation of its risk-based premiums policy, as described in Mortgagee Letter 2008-16, will be suspended. Mortgagee Letter 2008-22 reiterates the announcement of the moratorium, rescinds accordingly ML 2008-16 in its entirety, and describes the new upfront and annual premiums to be used for all forward mortgage loans insured under FHA's Mutual Mortgage Insurance (MMI) fund; the Section 203(k) rehabilitation mortgage insurance program; and individual condominium units insured under Section 234(c) for which a case number is assigned on or after October 1, 2008. ML 2008-22 also retains certain parts of ML 2008-16, which are restated therein.
Upfront Premiums
Beginning on October 1, 2008, the upfront mortgage insurance premium (UFMIP) will be based on the following percentages:
- Purchase Money Mortgages and Full-Credit Qualifying Refinances = 1.75 Percent
- Streamline Refinances (all types) = 1.50 Percent
- FHASecure (Delinquent Mortgagors) = 3.00 Percent.
Annual Premiums
Beginning on October 1, 2008, annual premiums for FHA loans (except FHASecure delinquent mortgages) will be based on the initial loan-to-value (LTV) ratio (computed to two decimals) and loan term according to the following schedule:
|
| Purchase-Money Mortgages; Full-Credit Qualifying Refinances; Streamline Refinances | < 95 | > 15 years | .50 |
| Purchase-Money Mortgages; Full-Credit Qualifying Refinances; Streamline Refinances | > 95 | > 15 years | .55 |
| Purchase-Money Mortgages; Full-Credit Qualifying Refinances; Streamline Refinances | < 90 | < 15 years | .00 |
| Purchase-Money Mortgages; Full-Credit Qualifying Refinances; Streamline Refinances | > 90 | < 15 years | .25 |
| FHASecure (delinquent mortgagors) | < 95 | All loan terms | .50 |
| FHASecure (delinquent mortgagors) | > 95 | All loan terms | .55 |
As stated in ML 2008-22, LTV is calculated by dividing the mortgage amount prior to adding on any UFMIP by the sales price or appraised value, whichever is less. In the case of refinance transactions, LTV is calculated by dividing the loan amount prior to adding on any UFMIP by the appraised value.
DocMagic Simplifies MIP Calculator
With the advent of the one-year moratorium on FHA's risk-based premiums policy (see ML 2008-22), DocMagic, Inc. will release a change to the DocMagic Mortgage Insurance Premium (MIP) Calculator on or before October 1, 2008, to provide the DocMagic user with more control over the factors to be used in calculating UFMIP and the annual mortgage insurance premium (MIP) by allowing the user to select the appropriate premium factors, as shown in the screenshots below:
Screenshot 1: The DocMagic user must select the appropriate UFMIP factor. Note that for FHA case number assignments on or after July 14, 2008, through September 30, 2008, an UFMIP factor from FHA's risk-based premiums policy, as described in ML 2008-16, will need to be selected. For case assignments on or after October 1, 2008, an UFMIP factor from the "Upfront Premiums" section of this article, or ML 2008-22, must be used.
Screenshot 2: Note that for FHA case number assignments on or after July 14, 2008, through September 30, 2008, an MI Renewal factor from FHA's risk-based premiums policy, as described in ML 2008-16, will need to be selected. For case assignments on or after October 1, 2008, an MI Renewal factor from the Table in the "Annual Premiums" section of this article, or ML 2008-22, must be used. Please note that the MI Renewal factor of .00 must be selected if an annual premium is not applicable to the subject loan. In this screenshot, .00 has been selected, because the subject loan is a purchase-money mortgage. Pursuant to ML 2008-22, annual premiums are not applicable to purchase-money mortgages, full-credit qualifying refinances or streamline refinances with an LTV < 90 and a loan term < 15 years. (See Table under "Annual Premiums" section of this article.)
DocMagic will continue to calculate monthly MIP using the Single Family Premium Collection Subsystem-Periodic (SFPCS-P) Premium Calculation, as outlined in the
attachment to
Mortgagee Letter 98-22. This Premium Calculation has also been referred to as the average outstanding balance (AOB) method (see
Compliance Wizard article, dated October, 2007, regarding AOB method), but will be referred to in this article as the FHA Premium Calculation.
Collaboration with a senior FHA underwriter, major FHA investors and various DocMagic customers has reinforced DocMagic's position that use of the FHA Premium Calculation is the method required to calculate monthly MIP for documents and disclosures. To that end, the DocMagic user no longer has the ability to select alternative methods for calculating monthly MIP. The only method now available in DocMagic is the FHA Premium Calculation, which can be validated by viewing the billing schedule found in the Single-Family Servicing/Mortgage Calculator section of FHA Connections.
Please note that if the DocMagic system detects that the Underwriter's Shorthand Method is being used to calculate monthly MIP in a particular customer's loan program, an audit will notify that customer that effective October 1, 2008, the subject FHA loan program will be converted accordingly.
If you have any specific questions related to the contents of this article, please contact Customer Service, at (800) 649-1362.
RSS