There have been a number of questions that have come up with the new changes effecting FHA Loans in the future. Let me try to help you understand what some of those changes are and how they might affect you.

ANNUAL MIP RATES

Below are the changes to FHA policies concerning the increases to the annual MIP, removal of the exception from the annual MIP for loans with terms of 15 years or less and LTV ratios of less than or equal to 78% at origination, and the change in duration and cancellation of annual MIP. This shows the previous and the new annual MIP rates by amortization term, base loan amount and LTV ratio. All MIP's below are effective for case numbers assigned on or after April 1, 2013.

ANNUAL MIP RATES on TERMS Greater Than 15 Years

Base Loan Amount less than/equal to $625,500 and LTV less than/equal to 95%, the previous MIP will rise from 120 BPS to 130 BPS.

Base Loan Amount less than/equal to $625,500 and LTV greater than 95%, the previous MIP will rise from 125 BPS to 135 BPS.

Base Loan Amount greater than $625,500 and LTV less than/equal to 95%, the previous MIP will rise from 145 BPS to 150 BPS.

Base Loan Amount greater than $625,500 and LTV greater than 95%, the previous MIP will rise from 150 BPS to 155 BPS.

ANNUAL MIP RATES on TERMS Less Than or Equal to 15 Years

Base Loan Amount less than/equal to $625,500 and LTV 78.01% to 90.00%, the previous MIP will rise from 35 BPS to 45 BPS.

Base Loan Amount less than/equal to $625,500 and LTV greater than 90%, the previous MIP will rise from 60 BPS to 70 BPS.

Base Loan Amount greater than $625,500 and LTV 78.01% to 90.00%, the previous MIP will rise from 60 BPS to 70 BPS.

Base Loan Amount greater than $625,500 and LTV greater than 90%, the previous MIP will rise from 85 BPS to 95 BPS.

The new annual MIP for loans with an LTV of less than or equal to 78 percent and with terms of up to 15 years - effective for case numbers assigned on or after June 3, 2013, Any Loan Amount will have a new rate on the MIP of 45 BPS, where before there was none.

REVISION TO THE PERIOD FOR ASSESSING ANNUAL MIP

For loans with FHA case numbers assigned on or after June 3, 2013, FHA will collect the annual MIP for the maximum duration permitted under statute.

oFor all mortgages regardless of their amortization terms, any mortgage involving an original principal obligation (excluding financed Up-Front MIP (UFMIP)) less than or equal to 90 percent LTV, the annual MIP will be assessed until the end of the mortgage term or for the first 11 years of the mortgage term, whichever occurs first.

oFor any mortgage involving an original principal obligation (excluding financed UFMIP) with an LTV greater than 90 percent, FHA will assess the annual MIP until the end of the mortgage term or for the first 30 years of the term, whichever occurs first.

Note: FHA calculates LTV as a percentage by dividing the loan amount (prior to the financing of any UFMIP) by the lesser of the purchase price (if applicable) or the appraised value of the home. For streamline refinances without appraisals, FHA uses the original appraised value of the property to calculate the LTV.

BUYING A NEW HOME: If you are planning to buy a new home, the only way you can avoid the new changes is to be in contact with your Lender before March 31,2013. In fact, it would be my recommendation that I have been telling my clients is to be sure that we are in contact with each other a few days before this date. Why? Unfortunately, everyone will be trying to beat the deadline and if such, you can only load up the system so much before it gets bogged down, or what we call in our industry "holds tracking" whereas the case number may not be assigned for 24-48 hours on a particular property. Even if the order went in before April 1, the rules states that any FHA Case Number assigned will be affected with the new changes on or after April 1, 2013.

IF YOU ARE THINKING ABOUT REFINANCING: Get in front of your lender before March 31, 2013, or as I mentioned above, even a few days before that to avoid a bottle neck. Your loan does not have to close before April 1, just as long that it closes before the six months are up when FHA assigned the Case Number. Changes to annual MIP do not apply to Streamline Refinances that refinance existing FHA loans that were endorsed on or before May 31, 2009.

If you missed the first wave of changes, try to avoid the changes that take affect June 3, 2013. Contact your Loan Officer immediately for assistance.