FHA increased it's annual mortgage insurance premium (which is paid on a monthly basis) for loans they insure from 0.55% to 0.90% in October of 2010 and again in April of 2011 to the current rate of 1.15% more than double what it was previously. Many homeowners with mortgages they took out prior to October 2010 who could have saved a significant amount of money by refinancing into a lower rate saw those savings wiped out by the increased mortgage insurance premium.
The latest plan reduces the costs on up-front FHA mortgage insurance premiums to 0.01 percent from 1 percent of a borrower's loan balance for refinancing under the "streamline" program. It also cuts the annual mortgage insurance premium fee for these loans to 0.55 percent. The new fees will apply to borrowers refinancing with original loans taken out before June 1, 2009.
With mortgage rates hovering around 4 percent, the administration estimates a typical FHA borrower with $175,000 outstanding on their loan could save $100 a month by refinancing into the streamline refinance with the lower insurance premium fees. The new lower mortgage insurance premiums will take effect on June 11, 2012.
White House Fact Sheet on FHA Refi Fee Changes.
HUD Press Release 12-045
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