MBA has prepared the following to help simplify for you the MIP policies of FHA that are in effect for loans closed on or after January 1, 2001, in accordance with HUD Mortgagee Letters 2000-38 and 2000-46. Also, please take special note of the information in paragraph C below.

A. Purchases and Regular Refinances (not including streamline refinances)

Term of new loan is more than 15 years:

1.50% Upfront .50 Annual

Annual MIP will terminate when the LTV reaches 78% either by regular monthly amortization payments or additional prepayments, but not before a minimum of five years of monthly MIP payments are paid, regardless of LTV.

Term of new loan is 15 years or less:

1.50% Upfront .25 Annual (no annual MIP if initial LTV is less than 90%)

There will be no annual MIP if the initial LTV is less than 90%. If the initial LTV is more than 90%, annual MIP will terminate when the LTV reaches 78% either through regular monthly amortization or additional prepayments, whether or not it has been paid for a minimum of five years. The five year rule stated above for loans with terms of more than 15 years is not applicable for loans with terms of 15 years or less.

B. Streamline Refinances

Streamline refinances can be originated with or without an appraisal. If the streamline is with an appraisal, the LTV will be based upon the current appraised value. If the streamline refinance is without an appraisal, HUD will calculate the LTV based upon the lower of the sales price or appraised value from the original transaction shown in HUD’s Single Family Insurance System record. If HUD cannot establish an LTV from its records, the LTV will default to 89.99%.

Loan being refinanced closed after 7/1/91

Term of new loan is more than 15 years:

1.50% Upfront .50 Annual

Annual MIP will terminate when the LTV reaches 78% either by regular monthly amortization payments or additional prepayments, but not before a minimum of five years of monthly MIP payments are paid, regardless of initial LTV.

Term of new loan is 15 years or less:

1.50% Upfront .25 Annual (no annual MIP if initial LTV is less than 90%)

There will be no annual MIP if the initial LTV is less than 90%. If the initial LTV is more than 90%, annual MIP will terminate when the LTV reaches 78% either through regular monthly amortization or additional prepayments whether or not it has been paid for a minimum of five years. The five year rule stated above for loans of more than 15 years is not applicable for loans with terms of 15 years or less.

Loan being refinanced closed before 7/1/91

1.50% Upfront No annual premium

Streamline refinances of mortgages made before July 1, 1991, regardless of the length of the new mortgage and whether they were originated with or without an appraisal, will have the 1.5% upfront premium and no annual MIP.

C. Special Note on all Refinances:

FHA has informed MBA that when processing all refinances, lenders may subtract the lesser of the UFMIP refund or the new UFMIP at 1.5 percent from the unpaid principal balance of the original mortgage before calculating the new mortgage amount. If the mortgage amount on the refinance is not calculated using this method, the borrower may have to pay cash at closing in order to pay off the principal balance of the original mortgage. See HUD Mortgagee Letters 92-35 (paragraph I) and 92-43 (paragraph IX), which established this policy when the UFMIP was reduced in 1992.