FHA annual premium reduction finalized

On January 8, 2015, President Barack Obama announced that the Federal Housing Administration (FHA) would reduce FHA annual mortgage insurance premiums (MIP) by 50 basis points. The National Association of REALTORS estimates that a 50-basis-point reduction in the annual MIP from 1.35 percent to 0.85 percent would price-in an additional 1.6 million to 2.1 million renters, along with many trade-up buyers. This would result in 90,000 to 140,000 additional annual home purchases.

The premium reduction will be effective for case numbers assigned on or after January 26, 2015. To allow borrowers already in the loan pipeline to take advantage of the lower rates, FHA will temporarily approve cancellation requests for active FHA case numbers within 30 days of January 26. Full details of the premium changes are published in Mortgagee Letter 2015-01.