FHA Announces Reduction in Annual Insurance Premiums

On January 9, 2017, FHA published Mortgagee Letter 2017-01, announcing that it will reduce the annual premiums most borrowers pay on a FHA insured mortgage by a quarter of a percent. The new premium rates are projected to save new FHA-insured homeowners an average of $500 this year.

FHA is reducing its annual mortgage insurance premium (MIP) by 25 basis points for most new mortgages with a closing/disbursement date on or after January 27, 2017. The closing/disbursement date refers to the later of the date of the signing of the mortgage, or the date of disbursement of the loan proceeds, as is entered in the FHA Connection.

The reduction in premiums reflects the fourth straight year of improved economic health of FHA’s Mutual Mortgage Insurance Fund (MMIF). It also reflects today’s risk environment and comes at the right time for consumers who are facing higher credit costs as mortgage interest rates are increasing. It is expected to significantly expand access to mortgage credit and lower the cost of housing for approximately 1 million households who are expected to purchase a home or refinance their mortgages with FHA-insured financing in the coming year.

Mortgagee Letter 2017-01 is available at: hudclips@hud.gov.