FHA MIP TRAINING (Mortgage Insurance Premium)

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1 FHA MIP TRAINING (Mortgage Insurance Premium) Offered by FIRST MORTGAGE CORPORATION APRIL 10, 2013 Desktop Underwriter is a registered trademark of Fannie Mae. Loan Prospector is a registered trademark of Freddie Mac. This presentation is a summary and is not complete. This information is for mortgage professionals only and should not be distributed to or used by consumers or other third-parties. Information is accurate as of the date shown below and is subject to change without notice. 04/10/2013

2 AGENDA Introduction FHA Mortgage Insurance Premiums MIP Calculations UFMIP AMIP Upcoming MIP Changes FAQ s and Resources FMC Support

3 INTRODUCTION Who is Federal Housing Administration? o The Federal Housing Administration generally known as FHA was established in 1934 as a division of the U.S. Department of Housing and Urban Development. o They provide mortgage insurance on loans made by FHA-approved lenders throughout the US and its territories. o It is the largest insurer of mortgages in the world insuring over 34 million properties since its inception. How is FHA funded? o The proceeds from the MI paid by the homeowners is used to operate the program entirely. o FHA operates from self-generated income and costs the taxpayers nothing. What is FHA Mortgage Insurance? o FHA MI protects lenders against loss if homeowner defaults on loan. o The lender bears less risk because FHA will pay the lender should a homeowner defaults on their loan. o The cost of the insurance is passed along to the borrower and is typically included in the monthly payment.

4 Mortgage Insurance Premium Sample Calculations MORTGAGE INSURANCE PREMIUM

5 MORTGAGE INSURANCE Topic Description Mortgage Insurance In most FHA Programs, HUD collects the following: 1. Up Front Mortgage Insurance Premium (UFMIP) This can be added to the loan amount and financed over the term of the loan, or it can be paid up front with cash or with seller contribution If financed, it does not subject to loan amount limit or LTV limit Uses fully amortized calculation 2. Annual Mortgage Insurance Premium (AMIP) Uses Simple Interest Calculation

6 UFMIP Up Front MIP UFMIP: 1.75% regardless of LTV or amortization term Uses fully amortized calculation SAMPLE: $100,000 Loan Amount, FHA 30yr Fixed, 96.50% LTV, 4.00% Interest Rate $100,000 x 1.75% = $1,750 Fully 4.00% for 30 years (fully amortized) = $8.35 per month

7 AMIP Annual MIP AMIP: 1.25% based on loan term, loan amount, and LTV Uses simple interest calculation SAMPLE: $100,000 Loan Amount, FHA 30yr Fixed, 96.50% LTV, 4.00% Interest Rate $100,000 x 1.25% = $1,250 / 12 mos = $ per month Total Mortgage Insurance Premium for sample scenario: UFMIP $ 8.35 AMIP $ Total MIP: $

8 Upcoming Changes UPDATED: FMC MIP Matrix MORTGAGE INSURANCE PREMIUM

9 UPCOMING CHANGES Topic Mortgagee Letter Highlights Revising period of AMIP assessment and Increased AMIP 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 ). Effective Date Increase of AMIP - Effective for case numbers assigned on or after April 1, All other AMIP changes Effective for case numbers assigned on or after June 3, 2013:

10 MORTGAGE INSURANCE Revision to the Period for Assessing AMIP (ML )

11 MORTGAGE INSURANCE Annual MIP Increase: See ML for details

12 MORTGAGE INSURANCE Annual MIP Increase: See ML for details

13 MORTGAGE INSURANCE FHA loans that were endorsed on or before May 31, 2009 Decrease in AMIP for Streamline Refinances Refinancing FHA loans endorsed on or before May 31, 2009 Annual MIP reduced to.55% regardless of the base loan amount Effective with case assignments on or after 6/11/2012 Decrease in UFMIP for Streamline Refinances Refinancing FHA loans endorsed on or before May 31, 2009 UFMIP reduced to.01% of the base loan amount Effective with case assignments on or after 6/11/2012 Effective Date: Case numbers assigned on or after June 11, 2012 (See ML for complete details)

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15 MI FAQ s Resources FMC Support MISCELLANEOUS

16 MI FAQ Topic Can a seller pay for the UFMIP? When can I stop paying for the AMIP? Description Yes; it can be paid as cash at closing instead of having it financed through the loan. However, the 1% will be included in the 6% max seller concession for FHA loans if paid this way. FHA 30 Year (> 15 year terms) MIP will be terminated at 78% LTV or after 5 years since borrower has been paying MIP whichever is longer. FHA 15 year terms or less MIP will be terminated at 78% irrespective of the length of time the borrower has paid MIP 78% LTV will be based on lesser of sales price or appraised value at loan origination - No new appraisal is required FHA Case numbers assigned on or after June 3, 2013 will fall under the new assessment period See ML

17 RESOURCES HUD Website Mortgage Credit Analysis Mortgagee Letters FHA Loan Limits FHA Approved Condos FHA FAQ

18 FMC SUPPORT WEB SITE TRAININGS SUPPORT Go to our FMC websites for: 1. RATE SHEET 2. TRAINING MATERIALS 3. GUIDELINES 4. FORMS 5. CALCULATORS 6. TOOLS 7. MARKETING First Mortgage offers FREE Weekly ONLINE Trainings See April Training schedule for upcoming trainings Trainings for April 2013: 4/4: FMC Product Overview 4/10: FHA MIP Training 4/12: Interpreting the DU Findings 4/16: CHF MCC Training Retail: Contact Loan Help Wholesale/Correspondent: Contact your FMC A/E For help with your: Scenarios Pricing / Fees Guidelines Loan Submissions Trainings

19 THANK YOU FOR YOUR BUSINESS On behalf of First Mortgage, thank you for joining today s training and we hope the information provided will help you build your business! The main purpose of First Mortgage Corporation s (FMC) training documents is to assist real estate and mortgage professionals in developing entry-level competence with loan programs. While FMC staff, employees, contractors and contributors take care to ensure the accuracy of the content of training documents, FMC makes no warranties as to the accuracy of the information contained within these materials. Furthermore, every user of this material uses it understanding that he or she must still conduct his or her own original legal research, analysis and drafting. In addition, every user must refer to the relevant legislation, case law, administrative guidelines, rules and other primary sources. FMC specifically disclaims any liability for any loss or damage any user may suffer as a result of information contained within this training material. While the information contained in FMC s training material addresses guidelines and issues surrounding mortgage programs, these materials do not constitute legal advice. All non-legal professionals are urged to seek legal advice from a lawyer.