On February 22, 2023, the U.S. Department of Housing and Urban Development (“HUD”) published Mortgagee Letter 2023-05 to announce a reduction in the annual Mortgage Insurance Premiums (“MIP”) for Federal Housing Administration (“FHA”) insured loans. The annual MIP will be reduced by 0.30 percentage points, from 0.85% to 0.55% for most borrowers. The base loan amount threshold used to establish MIP rates has also been amended to the national conforming loan limit of $726,200.
The 30-basis-point annual MIP reduction applies to all Single-Family Title II forward mortgages insured by FHA with the exception of Hawaiian Home Lands (Section 247) mortgages, and Streamline Refinance and Simple Refinance Mortgages used to refinance a previous FHA-endorsed mortgage on or before May 31, 2009. There is no change for Upfront Mortgage Insurance Premiums (“UFMIP”).
According to the White House, the MIP reduction is expected to lower housing costs by an average of $800 a year for about 850,000 homebuyers and homeowners in 2023.
Mortgagee Letter 2023-05 provides a copy of the amended Appendix 1.0 which will be incorporated into an upcoming update to HUD Handbook 4000.1, an excerpt of which is included below:
The revised annual MIP rates are effective for case numbers endorsed on or after March 20, 2023. This differs from previous adjustments to annual MIP which were based on a case assignment date. Lenders have 60 days following the disbursement date to have a loan endorsed by FHA. As a result, users are free to use the lower MIP rates now, if it is expected the endorsement may occur on or after March 20th. DocMagic is making updates to applicable audits which will apply the adjustments for annual MIP based on a disbursement date of March 20, 2023 or later due to the variability of endorsements for any particular loan.
