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© 2011 Promontory Financial Group, LLC
Appendix A: Comparison of Private and Government Mortgage Insurance and Guarantee
Programs
Source: FHFA, “State of the Private Mortgage Insurance Industry: Implications for U.S. Mortgage Markets
and the Enterprises,” August 2009.
Private Mortgage Insurance
The Housing Emergency Recovery Act
of 2008 (HERA) raised the down
payment on FHA-insured mortgages
from 3 to 3.5 percent. In some cases
VA does not require a down payment.
FHA insures the entire loan balance;
VA guarantees a percentage of the loan.
Limit on size of the mortgage
insured or guaranteed
None via regulation. But PMI
guidelines all impose some cap on
size of loans they will insure.
Pursuant to HERA, beginning in 2009,
the loan limit for FHA-insured
mortgages for one-unit properties is
115 percent of the local area median
home price, as determined by HUD,
with a floor of 65 percent of $417,000
(or $271,050) and a ceiling equal to 150
percent of the Enterprises' limit. Limits
vary by geographic region and for 2 - 4
unit properties. Beginning in 2009, the
VA's guarantee of loans above
$144,000 is 25 percent of the new
Enterprise loan limit base or the limits
Up-front mortgage insurance
premium
Required; varies with loan
characteristics and premium plan.
Required by FHA; VA requires an up-
front funding fee.
Premiums vary based on the size
of the down payment, type of
mortgage, and amount of
insurance coverage.
FHA borrowers pay an annual
insurance premium that starts at .5
percent of the loan balance and
declines over time. There is no
insurance premium for VA mortgages.
Cancellation of insurance
Can usually be canceled when the
homeowner acquires 20 percent
equity in the home. Under Federal
law, MI must be cancelled
automatically when the borrower
has paid the loan down to 78
percent of the original home
value.
For FHA mortgages with terms greater
than 15 years, the annual mortgage
insurance cancels when the LTV ratio
reaches 78 percent, provided the
borrower has paid the annual mortgage
insurance premiums for at least 5 years.
Deductibility of borrower-
paid mortgage insurance
Yes, up to a certain income level,
through the 2010 tax year.
Yes, up to a certain income level,
through the 2010 tax year.
State regulated. Regulation
extends to reserves for losses,
FHA and VA mortgage programs are
administered by agencies of the U.S.
Subject to regulatory approval