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Opinion: Rethinking the FHA mortgage insurance premium

In 2013, the Federal Housing Administration (FHA) began requiring borrowers to pay the Mortgage Insurance Premium (MIP) for the life of an FHA loan. This change triggered controversy. People have equated FHA insurance to that of private mortgage insurance used by the government-sponsored enterprises (GSEs), which is not life-of-loan. Understanding the difference between FHA and private mortgage insurance can shed light on why FHA changed its policy.

It can also help explain the benefits of changing the FHA MIP policy to a sliding scale to better reflect FHA’s actual risk and the economics of a GSE transaction.

To begin, the following details ⇒

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