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U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
WASHINGTON, DC 20410-8000



September 1, 2010

MORTGAGEE LETTER 2010-28


TO: ALL APPROVED MORTGAGEES


SUBJECT: Changes to FHA Mortgage Insurance Premiums


On August 12, 2010, the President signed into law, Public Law 111-229, which provides the
Secretary of Housing and Urban Development (HUD) with additional flexibility regarding the
amount of the premiums charged for Federal Housing Administration (FHA) single family housing
mortgage insurance programs. Specifically, the new law permits HUD to increase the amount of
the annual mortgage insurance premium that HUD is authorized to charge. For mortgages
involving an original principal obligation of less than or equal to 95 percent of the appraised value
of the property, the amount of the authorized annual premium is increased to 1.5 percent (from .50
percent) of the remaining insured principal balance. For mortgages involving an original principal
obligation that is greater than 95 percent of the appraised value of the property, the amount of the
authorized annual premium is increased to 1.55 percent (from 0.55 percent) of the remaining
insured principal balance. Although the law authorized HUD to go up to these amounts, HUD is
not doing so at this time, as described below. The Act authorizes HUD to adjust the amount of the
annual mortgage insurance premiums through Federal Register Notice or Mortgagee Letter.

HUD has decided to raise the annual premium and correspondingly lower the upfront
premium, except for Home Equity Conversion Mortgages (HECM), so that FHA is in a better
position to address the increased demands of the marketplace and return the Mutual Mortgage
Insurance (MMI) fund to congressionally mandated levels without disruption to the housing market.
Based on the new authority, effective for FHA loans for which the case number is assigned on or
after October 4, 2010, FHA will lower its upfront mortgage insurance premium (except for
HECMs) simultaneously with an increase to the annual premium which is collected on a monthly
basis. This policy change will decrease upfront premiums for purchase money and refinance
transactions, including FHA-to-FHA credit-qualifying and non-credit qualifying streamlined
refinance transactions.


Programs Not Affected by the Premium Changes

The upfront and annual premiums and the requirements described in this Mortgagee Letter
apply to all mortgages insured under FHA's Single Family Insurance Programs except those listed
below:
          - Title I
          - HOPE for Homeowners (H4H)
          - Section 247 (Hawaiian Homelands)
          - Section 248 (Indian Reservations)
          - Section 223(e) (declining neighborhoods)
          - Section 238(c) (Military Impact areas in Georgia and New York)

Upfront Premiums

Effective for FHA loans for which the case number is assigned on or after
October 4, 2010, for FHA traditional purchase and refinance products, the upfront premium, shown
in basis points below, will be charged for all amortization terms.

        Mortgage Type                                         Upfront Premium Requirement
Purchase Money Mortgages and Full-Credit                    100 BPS
Qualifying Refinances
Streamline Refinances (all types)                                      100 BPS

Annual Premiums

Effective for FHA loans for which the case number is assigned on or after
October 4, 2010, FHA will increase the annual premiums collected on a monthly basis. For FHA
traditional purchase and refinance products, the annual premium, shown in basis points below, is to
be remitted on a monthly basis, and will be charged based on the initial loan-to-value ratio and
length of the mortgage according to the following schedule:

      LTV                                       Annual Premiums for Loans > 15 Years
= or < 95 percent                                         85 BPS
>95 percent                                                 90 BPS

The annual premium for amortization terms equal to or less than 15 years remains unchanged and is
collected according to the following schedule.

     LTV                                       Annual Premiums for Loans = or < 15 Years
= or < 90 percent                                             -None-
>90 percent                                                     25 BPS

Cancellation of FHA's Annual Mortgage Insurance Premiums

The cancellation policies defined in Mortgagee Letters 2000-38 and 2000-46 remain
unchanged
.


First-Time Homebuyer with HUD-Approved Pre-Purchase Counseling

The National Housing Act, as amended by the Housing and Economic Recovery Act in
2008, authorizes upfront premiums of up to 3.00 except these premiums cannot exceed 2.75 percent
for first-time homebuyers who complete HUD-approved pre-purchase counseling. Since the
upfront premium rate of 1.00 percent remains below the statutory cap, no variable rate is provided
for under this Mortgagee Letter for first-time homebuyers who receive HUD-approved counseling.

Home Equity Conversion Mortgage (HECM) Loans

Effective for all HECM loans for which the case number is assigned on or after
October 4, 2010, FHA will increase the annual premium which is collected on a monthly basis.
This policy change will not affect the upfront premiums collected.

The annual premium, shown in basis points below is to be remitted on a monthly basis, and
will be charged according to the following schedule:

     Premium Type                                    Basis Points
Upfront                                                     200 BPS
Annual                                                      125 BPS

If you should have any questions concerning this Mortgagee Letter, please call the FHA
Resource Center at 1-800-CALLFHA (1-800-225-5342). Persons with hearing or speech
impairments may access this number via TDD/TTY by calling 1-877-TDD-2HUD (1-877-833-
2483).

Sincerely,



David H. Stevens
Assistant Secretary for Housing-
Federal Housing Commissioner

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