FHA Single Family Housing Policy Handbook 4000.1, III. SERVICING AND LOSS MITIGATION > A. Title II Insured Housing Programs Forward Mortgages > 1. Servicing of FHA-Insured Mortgages — k. Mortgage Insurance Premium Cancellation

FHA Single Family Housing Policy Handbook 4000.1, Part III — k. Mortgage Insurance Premium Cancellation (09/26/2022)

Effective 2022-09-26 · publisher's stamp for this provision

k. Mortgage Insurance Premium Cancellation (09/26/2022) i. Definition MIP Cancellation is the end of the obligation to remit the FHA MIPs to HUD 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, 2013 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 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, 2008 HUD 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 of 90 percent or greater. (D) Mortgage Term 15 Years or Less and LTV Ratio Greater than 78 percent but Equal to 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 MIP A 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 Borrower prepayments to the principal, but not sooner than five years from the date of origination, 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. As part of the Mortgagee’s annual disclosures to Borrowers, Mortgagees must notify Borrowers of their option to cancel the annual MIP in advance of the projected amortization date by making additional payments of mortgage principal. (F) Processing MIP Cancellation The Mortgagee must process the MIP cancellation using the Monthly MIP cancellation function in FHAC. iii. Cancellation 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 cancels 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 Shares At 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.

Source: FHA Single Family Housing Policy Handbook 4000.1, Update 18 (issued 2026-08-12) · source URL · snapshot e1bca3432cf19e09