Cancellation of the FHA monthly mortgage insurance premium (MIP) is based on several factors including the loan term, loan-to-value (LTV) and regulations in place when the loan is closed, or the case number was assigned, as applicable.
For loans with FHA case number assigned on or after 06/03/13, FHA will collect Annual MIP for the maximum duration permitted as described in ML 13-04:
All Loan Terms (Greater than 15 years and less than or equal to 15 years)
LTV greater than 90%
Annual MIP will be collected until the end of the loan term, or 30 years, whichever occurs first.
LTV less than or equal to 90%
Annual MIP will be collected until the end of the loan term, or 11 years, whichever occurs first.
For loans closed (or case numbers assigned, as applicable) 01/01/01 - 06/02/13, Annual MIP will be automatically cancelled when the LTV reaches 78% as follows:
Loan Terms Longer Than 15 Yrs
To be eligible for automatic cancellation the monthly MIP must have been paid for a minimum of five years.
Loan Terms 15 Years or Less
There is no minimum time period for which the MIP must have been paid (five year requirement does not apply).
If the LTV is 78.00% or less at loan closing it is exempt from MIP.
NOTES - For loans closed (or case numbers assigned, as applicable) 01/01/01 - 06/02/13
• MIP cancellation does not apply to loans that are not insured by the Mutual Mortgage Insurance (MMI) fund. Generally, loans closed prior to January 1, 2001 will not be eligible for cancellation of MIP, which is collected as part of the monthly mortgage payment.
• Cancellation of the annual MIP is normally based on the scheduled amortization of the loan. However, in cases where the loan payments have been accelerated or modified, cancellation can be based on the actual amortization of the loan as provided to FHA by the servicing lender.
• Mortgage insurance may also be terminated via payment in full, conveyance for insurance benefits, or voluntary termination upon agreement between the borrower and lender.
• Although the MIP is cancelled, the contract of mortgage insurance remains in force.
The changes to the duration of the annual MIP described in ML 13-04 do not apply to Title I or Home Equity Conversion Mortgages (HECMs).
Mortgagee Letters are available at http://portal.hud.gov/hudportal/HUD?src=/program_offices/administration/hudclips/letters/mortgagee
ML 13-04, ML 11-35
ML 13-04, ML 11-35
All policy information contained in this knowledge base article is based upon the referenced HUD policy document. Any lending or insuring decisions should adhere to the specific information contained in that underlying policy document.