Posted by Alice/MD on 10/28/09 2:15pm
Msg #308996
Questions from borrower about MI/MIP
I am often asked by borrower about (MIP) Mortgage Insurance Premium listed on the Settlement statement.. All I know about this Insurance is that it protects lenders against losses caused by a borrower's default on mortgage loan. I suggest that they ask loan officer for more details. Is there any feedback about this insurance?
| Reply by PAW on 10/28/09 2:24pm
Msg #308999
The following is from HUD (http://www.hud.gov/offices/hsg/sfh/faqs/atl1cre.cfm#anchor14783):
Mortgage Insurance Premiums (MIP)
Question 40: What is MIP?
Answer: Through its FHA Single Family Insurance Programs, HUD provides insurance for mortgages placed by private lenders and is designed to encourage lenders to make credit available in areas and to borrowers who may not otherwise qualify for conventional loans on affordable terms. FHA's role is essentially that of an insurance company. All borrowers must pay a mortgage insurance premium (MIP) to offset the insurance risk involved.
Question 41: How long will the borrower be expected to pay this premium?
Answer: The borrower is required to pay an upfront MIP and a monthly MIP, for a specific number of years, based on the LTV calculated at time of underwriting. Borrowers are now required to pay an upfront MIP and monthly MIP on all condominiums and 203(k) loans. Reference Mortgagee Letters 2005-38 and 2008-22; HUD Handbook 4155.2, 7.1, Handbook 4155.2, 7.2 and Handbook 4155.2, 7.3.
Question 42: At what point, or LTV percentage, can the MIP be terminated?
Answer: On loans closed on or after January 1, 2001, MIP will be terminated for mortgages with a term more than 15 years, provided the MIP has been paid for at least 5 years and have an LTV less than or equal to 78%; or for mortgages with a term 15 years and less serviced, in which the LTV ratios are 90% and greater and the LTV ratio is less than or equal to 78% and the MIP has been paid for at least 5 years. Mortgages with a term 15 years and less serviced and with a LTV ratio of 89.99% and less will not be charged annual MIP. Reference Handbook 4155.2, 7.3c.
Question 43: How does a borrower obtain information about MIP refunds?
Answer: They can call 1 (800) 697-6967 or email.
Note: For any FHA insured loans closed on or after January 1, 2001 and endorsed before December 8, 2004, no refund is due the homeowner after the fifth year of insurance. For FHA insured loans endorsed on or after December 8, 2004, no refund is due the homeowner unless they refinanced to a new FHA insured loan, and no refund is due these homeowners after the third year of insurance. Mortgagee Letter 2005-03 provides additional information on the recent policy changes regarding refunds of upfront mortgage insurance premiums.
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Since this is "public" information, there is no reason that you cannot provide the same answers to the borrower.
| Reply by Jim/AL on 10/28/09 2:26pm
Msg #309000
You got it right Alice, sounded great to me.
It is usually because the borrower is borrowing more than 80% (diff for some lenders) of the LTV.
Example : the home appraised for $100,000 and they want to borrow more than 80% or $80,000, usually the mortgage insurance would stay on the loan until they pay it down below the 80% or $80,000 owed on principal.
Hope that makes sense.
| Reply by Jim/AL on 10/28/09 2:27pm
Msg #309002
Yea, what Paul said, lol. n/m
| Reply by PAW on 10/28/09 2:30pm
Msg #309003
What you are talking about is PMI not MIP
>>> It is usually because the borrower is borrowing more than 80% (diff for some lenders) of the LTV. <<<
That's PMI (Private Mortgage Insurance). Not to be confused with MIP (Mortgage Insurance Premium) required by FHA to "insure" the loan.
| Reply by Jim/AL on 10/28/09 2:35pm
Msg #309004
Correct Paul, dislexic, some-timers and blond moment, my bad n/m
| Reply by Richard Ingram on 10/28/09 4:50pm
Msg #309020
Re: Correct Paul, dislexic, some-timers and blond moment, my bad
If Paw does not know or can not find out I don't know many others who can.
Thanks Paw for your wonderful contributions to this forum every day.
| Reply by PAW on 10/28/09 6:57pm
Msg #309043
Thank you for the 'attaboy'
Now, I only need 9 more to make up for my last DS (dumbs**t). 
| Reply by MW/VA on 10/28/09 7:53pm
Msg #309054
Re: Thank you for the 'attaboy'
Here's another "attaboy", Paul--now you only need 8 more. LOL
| Reply by MW/VA on 10/28/09 5:33pm
Msg #309026
I do take the time to briefly explain the MIP in an FHA loan. Since it's listed as "mortgage insurance" many times, I want to make sure the borrowers understand that it's a lender risk premium. As PAW said, this is public knowledge, and has nothing to do with the rate or terms of the loan.
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