III.A.1.k. Mortgage Insurance Premium Cancellation and Termination (03/14/16)

Owned by Kacey Olson
Last updated: Nov 25, 2018
4 min read

© HUD Single Family Housing Policy Handbook 4000.1

Included in this section are:

i. Definition

ii. Standard

iii. Termination of MIP on Mortgages with Case Numbers Assigned on or after June 3, 2013

iv. Distributive Shares

i. Definition

MIP Cancellation is the ending of MIP payments on an FHA-insured Mortgage closed on or after January 1, 2001, and assigned a case number before June 3, 2013.

ii. Standard

The policies in this section apply only to FHA-insured Mortgages that:

  • closed on or after January 1, 2001; and
  • have a case number assignment before June 3, 2013.

HUD automatically cancels FHA MIPs under the conditions set forth below. The Loan-to-Value (LTV) ratio is based on the principal balance excluding Upfront MIP (UFMIP). The FHA contract of insurance remains in force for the Mortgage’s full term, unless otherwise terminated.

HUD will not consider new appraised values in calculating if the Borrower has reached the required LTV ratio necessary for annual MIP cancellation.

HUD bases the cancellation of the annual MIP on the initial amortization schedule. In cases where Mortgage Payments have been accelerated or modified, HUD may base cancellation on the actual amortization of the Mortgage as provided to HUD by the servicing Mortgagee.

(A) Mortgage Term of More Than 15 Years For Mortgages with terms more than 15 years, HUD automatically cancels the annual MIP when the LTV ratio reaches 78 percent of the lesser of the initial sales price or appraised value at origination, provided the Borrower has paid the annual MIP for at least five years.

(B) Mortgage Term 15 Years or Less and LTV Ratio of Greater than 90 Percent with Case Numbers Assigned on and after July 14, 2008, and Before June 3, 2013HUD automatically cancels the annual MIP when the LTV ratio reaches 78 percent of the lesser of the initial sales price or appraised value at origination regardless of the length of time the Borrower has paid the annual MIP for Mortgages that:

  • have terms 15 years or less;
  • have a case number assigned on and after July 14, 2008, and before June 3, 2013; and
  • have LTV ratios greater than 90 percent.

(C) Mortgage Term 15 Years or Less and LTV Ratio of 90 Percent and Greater, Closed on or after January 1, 2001, and with Case Numbers Assigned before July 14, 2008HUD automatically cancels the annual MIP when the LTV ratio reaches 78 percent of the lesser of the initial sales price or appraised value regardless of the length of time the Borrower has paid the annual MIP for Mortgages that:

  • have terms 15 years or less;
  • closed on or after January 1, 2001, but have their case number assigned before July 14, 2008; and
  • have LTV ratios 90 percent or greater.

(D) Mortgage Term 15 Years or Less and LTV Ratio Greater than 78 percent but Equal or Less Than 90 Percent HUD automatically cancels the annual MIP when the LTV ratio reaches 78 percent of the lesser of the initial sales price or appraised value at origination regardless of the length of time the Borrower has paid the annual MIP for Mortgages that:

  • have terms 15 years or less;
  • have case numbers assigned on or after April 18, 2011; and
  • have LTV ratios of greater than 78 percent but equal to or less than 90 percent.

HUD does not charge annual MIP for Mortgages that:

  • have terms 15 years or less; have a case assigned on or after April 18, 2011, but before June 3, 2013; and have LTV ratios of 78 percent or less;
  • have terms 15 years or less; have a case number assigned on or after July 14, 2008 but before April 18, 2011; and have LTV ratios of 90 percent or less; or
  • have terms 15 years or less; closed on or after January 1, 2001 and have a case number assigned before July 14, 2008; and have LTV ratios of less than 90 percent.

(E) Borrower-Initiated Cancellation of MIPA Borrower who meets the following requirements may request cancellation of the collection of annual MIPs through their Mortgagee when:

  • the Borrower has reached the 78 percent threshold in advance of the scheduled amortization due to prepayments, but not sooner than five years from the Closing Date except for 15-year term Mortgages; and
  • the Borrower has not been more than 30 Days Delinquent on the Mortgage during the previous 12 months.

(F) Processing MIP Cancellation The Mortgagee must process the MIP cancellation using the Monthly MIP cancellation function in FHAC.

iii. Termination of MIP on Mortgages with Case Numbers Assigned on or after June 3, 2013

For Mortgages with FHA case numbers assigned on or after June 3, 2013, HUD automatically terminates FHA MIP as stated in Appendix 1.0 - Mortgage Insurance Premiums.

iv. Distributive Shares

(A) Definition A Distributive Share is a share of any excess earnings from the Mutual Mortgage Insurance Fund (MMIF) that may be distributed to a Borrower after mortgage insurance termination.

(B) Payment of Distributive Share sat HUD’s discretion, HUD may pay Distributive Shares when mortgage insurance is terminated. Upon termination of the FHA mortgage insurance of a Mortgage, HUD will determine if Distributive Shares are available. HUD is not liable for unpaid Distributive Shares that remain unclaimed six years from the date notification was first sent to the Borrower’s last known address.