Office of the Assistant Secretary for HousingFederal Housing Commissioner; Single Family Mortgage Insurance Premium

This rule makes final the proposed rule published by the Department on January 26, 1996, which proposed many benefits to the mortgage lenders that would reduce their servicing costs and the confusion generated by adjustments to the annual mortgage insurance premium (MIP) on cases not endorsed within the first six months after amortization. The rule changes the method of payment and the reconciliation schedule and clarifies the due date. It is expected that the changes will result in an increase in MIP income, thereby strengthening the FHA insurance fund. Also, costly reconciliation now done by HUD will be cut. Specifically, the rule provides that the FHA Commissioner can accrue MIP from the beginning of amortization (as defined in 24 CFR 203.251) on all Section 530 (of the National Housing Act) loans and risk-based loans, no matter what time frame exists between the endorsement date and the beginning of amortization. It also amends the existing regulation by requiring that mortgagees pay the monthly installments as due on or before the 10th of the month, whether or not collected from the mortgagor. A new system is being developed (and expected to be operational by Summer 1997) which would produce a monthly notice of premiums due, and the reconciliation will be made monthly by the lender when the premium is paid. A new Single Family Premium Collection Subsystem-Periodic (SFPCS-P) is being developed (and expected to be operational by Summer 1997) which will produce a monthly notice of premiums due, and the reconciliation will be made monthly by the lender when the MIP is paid, thus eliminating the requirement for annual reconciliation.