FHA Addresses 15 Year Mortgage Insurance

Date: September 21, 2011
Mortgagee Letter 11-35

Subject: Annual Mortgage Insurance Premium for Loans With Terms of 15 Years or Less and a Loan to Value (LTV) ratio of 78 Percent or Less at Origination

Purpose This Mortgagee Letter provides clarification on Annual Mortgage Insurance Premiums for loans with forward amortization terms of 15 years or less and an LTV of 78 percent or less at origination.

Effective Date This Mortgagee Letter is effective for case numbers assigned on or after April 18, 2011.

When Mortgagee Letter 2011-10 was issued, it did not address forward mortgage amortization terms of 15 years or less when the loan-to-value (LTV) ratios at loan origination are at 78 percent or less.

Currently the annual MIP is canceled for mortgages with amortization terms of 15 years or less when the LTV reaches 78 percent. Therefore, this Mortgagee Letter confirms that Annual Mortgage Insurance Premiums are not charged for all forward mortgages with Amortization terms of 15 years or less, and LTVs at or below 78 percent at the time of origination

Additionally, when the changes to the annual MIP were made to HUD Handbook 4155.2 through Mortgagee Letter 2011-10, Section 7.3.c was inadvertently left out of the list of affected topics. Therefore, this Mortgagee Letter clarifies that the references to the automatic termination of MIP in Section 7.3.c of HUD Handbook 4155.2 will be updated to reflect that the annual MIP terminates for mortgages with amortization terms of 15 years or less when the LTV reaches 78 percent and that no annual MIP is charged when the initial LTV for such mortgages is at or below 78 percent. There are no other changes to the Annual Mortgage Insurance Premiums, and there are no changes to the Upfront Mortgage Insurance Premium (UFMIP).

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