Now that Congress has passed and the President has signed HR 5981, FHA released Mortgagee Letter 2010-28 on September 1, 2010, outlining the program’s new mortgage insurance premium structure. The Mortgagee Letter is applicable for FHA loans assigned case numbers on or after October 4, 2010. HR 5981 provided HUD the authority to increase FHA annual premiums from .50 percent to 1.55 percent; however, according to the Mortgagee Letter, HUD will only be increasing the FHA annual premium to .85 percent on 30 year loans with a LTV of 95 percent or lower, and .90 percent on 30 year loans with a LTV greater than 95 percent. Additionally, HUD is decreasing the upfront premium on traditional purchase money mortgages and refinances to 1 percent.
HUD had asked for and was given this authority in an attempt to return its Mutual Mortgage Insurance fund back to Congressionally mandated levels and avoid any chance of a taxpayer bailout.