President Obama announced the reduction in the annual MIP rates by 50 BPS and the subsequent temporary case cancellation authority, affecting primarily 30 year Fixed rate FHA insured loans that are currently in the loan process and not closed. That authority enables lenders to cancel current FHA assigned case numbers so that those borrowers may take advantage of the reduction in their MIP (mortgage insurance) rates. A reduction from a factor of 1.35 to .85 can result in a savings of $100 a month on a purchase of a $250,000 home with 3.5% down payment.

The annual MIP rate reduction is effective for FHA case numbers assigned on or after January 26. FHA will temporarily approve case number cancellation requests for cases assigned but not yet closed to allow mortgagees to obtain the reduced annual MIP rates. Mortgagees can begin requesting case number cancellations on January 15, but must submit all case number cancellation requests under this temporary authority by 11:59 p.m. (EST) on February 26.

These rates will be a little closer to conventional loan PMI rates, whereas there had been quite a difference in cost and subsequent monthly PMI. If you have an FHA insured loan in progress you must consult with your loan officer on what the lender's procedure is regarding your particular loan if the rate is currently locked and whether you can still meet the contract requirement for when your home loan must close by. Otherwise, you will be able to participate, on a streamline refinance a little over 200 days from the date of the closing on your home purchase.