We’ve received several calls from confused clients regarding the mortgage insurance premium (MIP) factor and how it relates to the new HUD Qualified Mortgage (QM) status.
Basically, all HUD (FHA) loans are QMs. They will receive a “conclusive” safe harbor if the rate spread between the annual percentage rate (APR) and average prime offer rate (APOR) is less than or equal to the annual MIP premium plus 1.15%. On the other hand, they will receive a “presumption of compliance” if the APR/APOR rate spread is greater than the annual MIP premium plus 1.15%.
You will find the current annual MIP rates within the 2nd and 3rd tables of HUD’s Mortgage Letter 2013-04. Please note the rates are noted as “basis points” so, for example, 135 bps = 1.35%.