April is the Magic Month for FHA Changes

Written By: Stacey Sprain, Op-Ed Writer

April showers bring Spring flowers and this year April also brings forth a list of significant FHA program changes that we all need to be aware of.

Effective 04/18/2011
Changes to FHA’s annual mortgage insurance premiums which add .25 bps to the current annual premiums. These new premiums are effective for cases assigned on and after April 18th.

Current annual MI premiums through April 17th:
Term is greater than 15 yrs
>95% LTV = .90
<=95% LTV = .85

Term is less than or equal to 15 yrs
>90% LTV = .25
<= 90% LTV = n/a

New Annual MI premiums effective April 18th
Term is greater than 15 yrs
>95% LTV = 1.15
<=95% LTV = 1.10

Term is less than or equal to 15 yrs
>90% LTV = .50
<= 90% LTV = .25

Effective 04/18/2011
For cases assigned on and after this date, FHA Connection case assignment screens will require mortgagees to

• certify at the time of requesting a case number that they have an active loan application for the subject borrower and property; and

• provide the subject borrower’s name and social security number for all new construction (i.e., proposed construction and existing construction less than one year old).

Effective 04/18/2011
FHA systems will automatically cancel any uninsured case number where there has been no activity for 6 months since
the last action. “Last Action” includes case number assigned, appraisal logging completed, firm commitment issued, insurance application submitted or updated, and/or notification of returned submission from HUD. Last action does not include updates to borrower names and/or property addresses.

The only exceptions to the automatic case cancellation situations are

• Loans that reflect a current valid appraisal in Appraisal Logging; and

• Loans that reflect payment of Upfront Mortgage Insurance Premium.

In order to prevent automatic case cancellation at the six month mark, mortgagees must make sure actions are taken as soon as possible in the process. Appraisals must be logged as soon as they are received. Second appraisals and appraisal updates must be logged as soon as they are received. Upfront Mortgage Insurance Premiums should be paid as soon as possible in the process.

Automatic case cancellations apply for all cases assigned both before and after April 18th for all FHA loan types including HUD REO, new construction and HECM.

HUD will only allow reinstatement of automatically cancelled case numbers if

• the mortgagee provides evidence that the subject loan closed prior to cancellation of the case number, such as a HUD-1 Settlement Statement, or
• the mortgagee provides evidence that not reinstating the case number causes an undue hardship to the borrower that is unrelated to recent changes to premiums and underwriting requirements.

Stay Tuned! Next week we’ll review the upcoming FHA refinance program changes that are occurring in the month of April!

About The Author

Stacey Sprain - As an op-ed writer, Ms. Stacey Sprain is currently a NAMP® Certified Ambassador Loan Processor (NAMP®-CALP). With over 15+ years of mortgage banking experience, Stacey is also a Quality Control Manager for a major mortgage lending institution. 

Opinion-Editorial (Op-Ed) Disclaimer For NAMU® Library Articles: The views and opinions expressed in the NAMU® Library articles are those of the authors and do not necessarily reflect any official NAMU® policy or position. Examples of analysis performed within this article are only examples. They should not be utilized in real-world application as they are based only on very limited and dated open source information. Assumptions made within the analysis are not reflective of the position of NAMU®. Nothing contained in this articles should be considered legal advice.