New FHA Fees Go Into Effect

April 21, 2011

The Federal Housing Administration (FHA) increased its annual mortgage premium (MIP) by .25 percent on all 30- and 15-year loans issued on or after April 18, 2011.

The upfront MIP will remain unchanged at 1.0 percent

FHA issued this Mortgagee Letter explaining the changes.

This increase applies to all mortgages insured under FHA’s Single Family Mortgage Insurance Programs except:

  • Title I Home Equity Conversion Mortgages (HECM)
  • HOPE for Homeowners (H4H)
  • Section 247 (Hawaiian Homelands)
  • Section 248 (Indian Reservations)
  • Section 223(e) (Declining Neighborhoods)
  • Section 238(c) (Military Impact areas in Georgia and New York)
The proposed change was announced as part of the Obama Administration’s report to Congress, which outlined the Administration’s plan to reform the nation’s housing finance system. The Administration’s housing finance plan also recommended that Congress allow the present increase in FHA conforming loan limits to expire as scheduled on Oct. 1, 2011.

On average, FHA said new borrowers will pay approximately $30 more per month. Existing and HECM loans insured by FHA are not impacted by the pricing change.

FHA said it will continue to play an important role in the nation’s mortgage market in 2011. President Obama’s FY 2012 budget projects the FHA will insure $218 billion in mortgage borrowing in 2012.

However, FHA’s market share dropped to its lowest level in more than two years in February, according to a survey of 20 large housing markets nationwide conducted by DataQuick Information Systems.

In February, 33 percent of the purchase mortgages used in those 20 metro areas were FHA-insured, down from 38 percent in February 2010. FHA loans peaked at 41 percent of all home purchase loans in November 2009.