FHA "Risk Based" Pricing for Mortgage Insurance

FHA has announced that effective with new FHA case number assignments on or after July 14, 2008, FHA will implement risk-based premiums on one- to four-unit single-family mortgages. The premium matrix published in Mortgagee Letter 08-16 replaces the premium matrix previously published in Mortgagee Letter 00-38, which identifies the current mortgage insurance premiums for FHA’s single-family programs.

• UFMIP will range from 1.25 percent of the loan amount for lower-risk borrowers to 2.25 percent for riskier borrowers
• No borrower who qualifies for a FHA-insured mortgage will pay more than 2.25 percent on the upfront mortgage insurance premium (UFMIP) and 55 basis points for the annual premium
• Borrowers with credit bureau scores must be risk-classified by FHA’s TOTAL Mortgage Scorecard.
• Those in risk categories without a premium shown are not eligible for FHA-insured mortgage financing.
• Borrowers without credit bureau scores will need to be manually underwritten and deemed as eligible based on criteria described in Mortgagee Letter 2008-11: the mortgage insurance premium will be determined by the loan-to-value ratio for the non-traditional column in the premium schedule

For further details regarding the Risk Based Pricing please see Mortgagee Letter 08-16.

Currently, the ProClose System produces a warning window when any percentage higher than 1.25 is entered in the first PMI Factor data field. Should your loan fall within the new criteria above, please disregard the current warning. We are in the process of updating our system and the warning will be removed shortly.