Written By: Glenn Michaels, Op-Ed Writer
The FHA with case numbers assigned on or after April 1, 2013 will be implementing revised underwriting guidelines and revised annual MIPS that will also last longer than the current MIP schedule.
Revised Underwriting Guidelines
All FHA case numbers assigned on or after April 1, 2013 that have a credit decision score of less than “620” and Total Fixed Payments to Effective Income Ratio Exceeding 43% must now be downgraded to “Refer” and be manually underwritten by the underwriter. The underwriter now must give justification for approving the loan.
Need FHA Training? CLICK HERE: http://www.FHA-Classes.org
Borrowers refinancing in a negative equity position with a credit decision score of less than “620” and the debt to income exceeds 43% must be downgraded to “Refer” and manually underwritten. Now the underwriter must give justification for approving the loan.
Revised Annual MIPS and Longer Payment of the MIPS
All FHA cases assigned on or after April 1, 2013 will now pay a higher annual MIP and the time to pay the annual MIP has increased significantly.
FHA cases assigned on or after April 1, 2013 will no longer be cancelled at 78% LTV and/or 5 years minimum. Under the new rules loans with a loan term of 15 years or less with a LTV of 90% or less will now pay for 11 years and loans with a LTV greater than 90% will pay for the entire term of the mortgage. Loans with terms greater than 15 years with a LTV of 90% or less will pay for 11 years. Loans with a LTV greater than 90% will pay for the term of the loan.
The annual MIP has been increased for all cases assigned on or after April 1, 2013.
Loans with loan terms greater than 15 years are increasing from 5 bps to 10bps depending on the loan amount and the loan to value.
Need FHA Training? CLICK HERE: http://www.FHA-Classes.org
Loans with terms of 15 years or less are also increasing. The increase depending on the loan amount and loan to value are increasing 10 bps except for loans under 78% LTV, they are increasing 45bps. Prior to the issuance of Mortgagee Letter 2013 – 04, borrowers that took a FHA loan with a LTV under 78% for a term of 15 years or less paid no annual MIP. Now these borrowers will pay 45bps for 11 years.
The increased annual MIPS and longer payment of the annual MIPS is designed to bolster the FHA fund.
About The Author
Glenn Michaels - As an op-ed writer, Glenn Michaels is a mortgage underwriting instructor for CampusUnderwriter (www.MortgageUnderwriter.org). As a BBA & FHA DE Underwriter, Glenn is a Pace University graduate who also graduated from New York University’s School of Mortgage Finance. Glenn has conducted numerous training classes and has worked in the mortgage banking industry for 38 years.
