January 23, 2017
Last week we wrote about some good news from the FHA in the form of lower insurance premiums. But on Friday HUD suspended the 0.25 percentage point premium rate cut for Federal Housing Administration-backed loans until further notice. The Housing and Urban Development’s letter implied that they felt the insurance fund was not yet stable and couldn’t afford it, and suspended the cut “indefinitely ... effective immediately.”
Orion’s management believes that FHA loans are still a great deal even with the old MIP rates. The loan amounts can be very high, depending on county, with 3.5% down, non-occupant co-borrowers allowed, all gift, seller credit, no termite report necessary, lower credit scores are OK, and so on. Since the premium cut announcement was only a few days old and had not taken effect, the impact of the suspension is minimal, and that little of the price cut goes to expand access to new homebuyers not already intending to purchase.
Brokers with FHA loans in process should consult your Orion AE with any questions: the issues may be complex. For example, in general, for those loans where Orion has issued a Loan Estimate (LE) to the borrower with an MIP based on the FHA’s Mortgagee Letter (ML), government action to delay or cancel the MIP reduction would be a valid “changed circumstance” which could necessitate Orioni providing a revised LE to the borrower without the reduction, within 3 business days after receiving the information sufficient to establish the change (the announcement that the MIP reduction is to be delayed or cancelled).
Or if a lender such as Orion has issued the borrower a Closing Disclosure (CD) with a MIP based on the ML and if delaying or cancelling the MIP reduction results in the APR becoming understated by more than the applicable APR tolerance, issuance of a new CD is necessary. Orion and others may need to provide this new CD within 3 business days after receiving information that the MIP is delayed or cancelled. If a new CD is required based on the APR becoming understated by more than the applicable APR tolerance, a new review period is also required. Our broker’s clients would have to receive the revised Closing Disclosure at least 3 business days before closing.
For FHA refinance loans in the pipeline, it is important to ensure that any loan closed in the next few days not be based on the ML 2017-1 MIP. Such action is necessary to avoid closing a loan and then discovering during or following the rescission period that the loan is uninsurable. We again urge you to consult with your Orion AE or Orion’s compliance department on these issues.