FHA Insurance Reductions Put On Hold
Within hours of the Trump Administration taking office on Friday, the Federal Housing Administration (FHA) issued a letter suspending a previous decision to reduce the Mortgage Insurance Premium rates (MIP) for homebuyers with FHA mortgages. The original mortgage letter was issued January 9th and was going to apply to mortgages closing on or after January 27, 2017.
The FHA provides insurance against default for qualified borrowers. Borrowers who qualify contribute to the insurance by paying Mortgage Insurance Premiums. On January 9th the FHA announced that it was substantially reducing its premium rates. For example, a mortgage loan of less than $625,500 with a LTV equal to or greater than 95% would have its annual MIP reduced from 100 basis points to 55 basis points. These reductions came after several years of rising concerns that the FHA would need a government bailout.
Although the reduction was suspended prior to any mortgages being issued, the decision may impact disclosures that were made based on the January 9, 2017 letter. If the new requirements impact the accuracy of your required disclosures that you made based on the January 9th changes, to me this qualifies as a changed circumstance, for which you can reissue disclosures without a penalty. The decision to put insurance reductions on hold constitutes new information based on an event that is outside of the control of either the lender or the borrower. Take a look for yourself. While I of course always strive to be accurate, nothing I say here should be considered a substitute for seeking legal advice.