**June 11, 2008**

**MORTGAGEE LETTER 2008-16**

**TO: ALL APPROVED MORTGAGEES**

**SUBJECT: Risk-Based Premiums for FHA Mortgage Insurance**

Effective with new FHA case number assignments on or after July 14,
2008, FHA will implement risk-based premiums on one- to four-unit single
family mortgages. The premium matrix is shown below, replacing the
premium matrix in Mortgagee Letter 00-38, which identifies the current
mortgage insurance premiums for FHA's single family programs.

+--------+------+------+------+-------+-------+------+------------+
| FHA    |      |      |      |       |       |      |            |
| Single |      |      |      |       |       |      |            |
| Family |      |      |      |       |       |      |            |
| Mo     |      |      |      |       |       |      |            |
| rtgage |      |      |      |       |       |      |            |
| Ins    |      |      |      |       |       |      |            |
| urance |      |      |      |       |       |      |            |
|        |      |      |      |       |       |      |            |
| U      |      |      |      |       |       |      |            |
| pfront |      |      |      |       |       |      |            |
| and    |      |      |      |       |       |      |            |
| Annual |      |      |      |       |       |      |            |
| Mo     |      |      |      |       |       |      |            |
| rtgage |      |      |      |       |       |      |            |
| Ins    |      |      |      |       |       |      |            |
| urance |      |      |      |       |       |      |            |
| Pr     |      |      |      |       |       |      |            |
| emiums |      |      |      |       |       |      |            |
|        |      |      |      |       |       |      |            |
| (Loan  |      |      |      |       |       |      |            |
| Terms  |      |      |      |       |       |      |            |
| \> 15  |      |      |      |       |       |      |            |
| years) |      |      |      |       |       |      |            |
|        |      |      |      |       |       |      |            |
| *Eff   |      |      |      |       |       |      |            |
| ective |      |      |      |       |       |      |            |
| as of  |      |      |      |       |       |      |            |
| July   |      |      |      |       |       |      |            |
| 14,    |      |      |      |       |       |      |            |
| 2008*  |      |      |      |       |       |      |            |
+--------+------+------+------+-------+-------+------+------------+
| All    |      |      |      |       |       |      |            |
| pr     |      |      |      |       |       |      |            |
| emiums |      |      |      |       |       |      |            |
| are    |      |      |      |       |       |      |            |
| spe    |      |      |      |       |       |      |            |
| cified |      |      |      |       |       |      |            |
| in     |      |      |      |       |       |      |            |
| basis  |      |      |      |       |       |      |            |
| points |      |      |      |       |       |      |            |
| (      |      |      |      |       |       |      |            |
| 0.01%) |      |      |      |       |       |      |            |
+--------+------+------+------+-------+-------+------+------------+
| **De   |      |      |      |       |       |      |            |
| cision |      |      |      |       |       |      |            |
| Credit |      |      |      |       |       |      |            |
| Score  |      |      |      |       |       |      |            |
| (F     |      |      |      |       |       |      |            |
| ICO)** |      |      |      |       |       |      |            |
+--------+------+------+------+-------+-------+------+------------+
| *      | **8  | **6  | **6  | *     | *     | **4  | **NON-TRA  |
| *LTV** | 50-6 | 79-6 | 39-6 | *599- | *559- | 99-3 | DITIONAL** |
|        | 80** | 40** | 00** | 560** | 500** | 00** |            |
+--------+------+------+------+-------+-------+------+------------+
| **≤    | 12   | 12   | 12   | 1     | 1     | 17   | 150/50     |
| 9      | 5/50 | 5/50 | 5/50 | 50/50 | 75/50 | 5/50 |            |
| 0.00** |      |      |      |       |       |      |            |
+--------+------+------+------+-------+-------+------+------------+
| **9    | 12   | 12   | 15   | 1     | 2     | n/a  | 175/50     |
| 0.01-9 | 5/50 | 5/50 | 0/50 | 75/50 | 00/50 |      |            |
| 5.00** |      |      |      |       |       |      |            |
+--------+------+------+------+-------+-------+------+------------+
| **\>   | 12   | 15   | 17   | 2     | 225^  | n/a  | 200/55     |
| 95**   | 5/55 | 0/55 | 5/55 | 00/55 | a^/55 |      |            |
+--------+------+------+------+-------+-------+------+------------+
| a.  A  |      |      |      |       |       |      |            |
|        |      |      |      |       |       |      |            |
|   firs |      |      |      |       |       |      |            |
| t-time |      |      |      |       |       |      |            |
|        |      |      |      |       |       |      |            |
|   home |      |      |      |       |       |      |            |
| buyer, |      |      |      |       |       |      |            |
|        |      |      |      |       |       |      |            |
|   with |      |      |      |       |       |      |            |
|        |      |      |      |       |       |      |            |
| HUD-ap |      |      |      |       |       |      |            |
| proved |      |      |      |       |       |      |            |
|        |      |      |      |       |       |      |            |
|  couns |      |      |      |       |       |      |            |
| eling, |      |      |      |       |       |      |            |
|        |      |      |      |       |       |      |            |
|   will |      |      |      |       |       |      |            |
|        |      |      |      |       |       |      |            |
|    pay |      |      |      |       |       |      |            |
|        |      |      |      |       |       |      |            |
|   only |      |      |      |       |       |      |            |
|        |      |      |      |       |       |      |            |
|    200 |      |      |      |       |       |      |            |
|        |      |      |      |       |       |      |            |
|  basis |      |      |      |       |       |      |            |
|        |      |      |      |       |       |      |            |
| points |      |      |      |       |       |      |            |
|        |      |      |      |       |       |      |            |
|    for |      |      |      |       |       |      |            |
|        |      |      |      |       |       |      |            |
|    the |      |      |      |       |       |      |            |
|     u  |      |      |      |       |       |      |            |
| pfront |      |      |      |       |       |      |            |
|     mo |      |      |      |       |       |      |            |
| rtgage |      |      |      |       |       |      |            |
|        |      |      |      |       |       |      |            |
|    ins |      |      |      |       |       |      |            |
| urance |      |      |      |       |       |      |            |
|        |      |      |      |       |       |      |            |
|    pre |      |      |      |       |       |      |            |
| miums. |      |      |      |       |       |      |            |
+--------+------+------+------+-------+-------+------+------------+

The premium grid is based solely on the prospective borrower's credit
bureau score and the loan-to-value ratio; both are defined below.

**[Future Changes to the Risk-based Premium Schedule]{.underline}**

It is FHA's intent to make any subsequent changes to the risk-based
premium schedule only on an annual basis and make them effective at the
beginning of the fiscal year. FHA's fiscal year begins October 1 and
ends September 30.

**[Highlights Regarding FHA's Risk-Based Premiums]{.underline}**

-   UFMIP will range from 1.25 percent of the loan amount for lower-risk
    borrowers to 2.25 percent for riskier borrowers.

-   No borrower who qualifies for a FHA-insured mortgage will pay more
    than 2.25 percent on the upfront mortgage insurance premium (UFMIP)
    and 55 basis points for the annual premium.

-   Borrowers with credit bureau scores must be risk-classified by FHA's
    TOTAL Mortgage Scorecard.

-   Those in risk categories without a premium shown are not eligible
    for FHA-insured mortgage financing.

-   Borrowers without credit bureau scores will need to be manually
    underwritten and deemed as eligible based on criteria described in
    Mortgagee Letter 2008-11; the mortgage insurance premium will be
    determined by the loan-to-value ratio for the non-traditional column
    in the premium schedule.

**[Loan-to-Value]{.underline}**

For risk-based premium purposes, the loan-to-value ratio, computed to
two decimals (e.g., 95.65), is calculated by dividing the mortgage
amount prior to adding on any upfront mortgage insurance premium by the
sales price or appraised value, whichever is less. Please note that for
purchase transactions, the loan-to-value will be the percentage of the
sales price (or appraised value) that is borrowed, e.g., 97.75 percent,
as prescribed by law. While borrowers must have at least a three percent
cash investment into the property, a portion of their closing costs may
be used to meet that amount.

For refinance transactions, which often include closing costs in the
loan amount, the LTV is determined by dividing the loan amount prior to
adding on any upfront mortgage insurance premium by the appraiser's
estimate of value.

**["Decision Credit Score" Defined]{.underline}**

If a credit score is available, it must be used to determine the
decision credit score for the application and the premium to be charged.
A "decision credit score" is determined for each applicant according to
the following rule: when three scores are available (one from each
repository), the median (middle) value is used; when only two are
available, the lesser of the two is chosen; when only one is available
that score is used.

[Multiple Borrowers]{.underline}. If more than one individual is
applying for the same mortgage, the lender must determine the decision
credit score for each individual borrower and then select the lower (or
lowest if more than two borrowers). That \"decision\" credit score is
then used to determine the appropriate insurance premium in conjunction
with the LTV ratio.

[Multiple Borrowers/One Without Credit Score(s)]{.underline}. The
borrower representing the greatest risk to the Department will determine
the premium charged. For example, if the decision credit score for one
borrower is between 559-500 and the other borrower is in the
non-traditional credit category, the decision credit score between
559-500 is used to determine the premium. However, if the decision
credit score for one borrower is between 639-600, and the other borrower
is in the non-traditional credit category, the non-traditional credit
category is used to determine the premium.

[Multiple Borrowers/Ineligible Score]{.underline}. Borrowers who fall
into a cell with no premium price shown are not eligible for FHA-insured
financing. Lenders may consider reducing the loan-to-value ratio to 90
percent or removing the borrower from the loan to proceed with the
application.

[Borrower Disputes Credit Score]{.underline}. If the mortgage
applicant(s) disputes the accuracy of the credit report and, thus, the
credit scores:

-   The borrower may delay the transaction and work to repair his/her
    credit, or

-   The borrower may pay the mortgage insurance premium based on the
    credit score generated (and LTV)

**[Non-Traditional Credit]{.underline}**

For premium purposes, the borrower representing the greatest risk to the
Department will determine the premium to be charged (see Multiple
Borrowers/One Without Credit Score(s)). For underwriting purposes,
borrowers with non-traditional credit (or insufficient credit) must
qualify based on the underwriting guidance described in Mortgagee Letter
2008-11.

To clarify the guidance in Mortgagee Letter 2008-11 regarding
'thin-file' credit reports, the intention was to give lenders the option
to also use non-traditional credit sources should they have a minimum
trade line requirement to use a credit bureau score. While the premium
charged is based on the borrower representing the greatest risk to the
Department, for underwriting purposes lenders may use non-traditional
credit methodology to make their determination on the borrower's
willingness to repay the new FHA-insured mortgage.

**[Refinancing Delinquent Loans into FHASecure]{.underline}**

For borrowers refinancing **delinquent** non-FHA ARMs the Upfront
mortgage insurance premiums (UFMIP) is set at **2.25** percent of the
base loan amount (loan amount excluding UFMIP) regardless of the
loan-to-value (LTV) ratio.

Automated underwriting systems will provide lenders with a feedback
message that will inform them of the premium to be charged without
recognizing that the loan being refinanced is delinquent. Therefore, the
feedback message providing the premium message will caution lenders that
if the loan being refinanced is delinquent, then the premium is **2.25**
percent for the UFMIP and .**55** percent for annual premium when LTV
ratio greater than 95 percent; if the LTV ratio is equal to or less than
95 percent, the annual premium is .50 percent.

Borrowers who refinance their delinquent non-FHA ARM loan into
*FHASecure* and subsequently wish to refinance to another FHA-insured
mortgage must use a refinance product that requires full qualifying,
e.g., a rate and term refinance. Once the FHA-to-FHA full qualifying
refinance is insured, these borrowers will be able to take advantage of
FHA's Streamline Refinance program.

**[Underwriting Rules When Using FHA's TOTAL Mortgage
Scorecard]{.underline}**

If TOTAL renders a refer risk classification or triggers a review rule,
the mortgagee's Direct Endorsement underwriter must determine whether
the borrower qualifies for the mortgage using the basic underwriting and
eligibility requirements outlined in Mortgagee Letter 2004-47 (TOTAL
Mortgage Scorecard User Guide) and handbook HUD-4155.1 REV-5. [However,
once determined as eligible for a FHA-insured mortgage, the insurance
premium charged is as shown in the matrix above.]{.underline}

Review Rules for FHA's TOTAL Mortgage Scorecard include excessive
payment-to-income ratios and debt-to-income ratios; and from the credit
files, a previous mortgage foreclosure within 3 years, a bankruptcy
discharged within 2 years and late mortgage payments. TOTAL will refer
the application for underwriting analysis if any mortgage trade line,
including mortgage line-of-credit payments, during the most recent 12
months shows:

-   3 or more late payments of greater than 30 days; or

-   1 or more late payments of 60 days plus one or more 30-day late
    payments; or

-   1 payment greater than 90 days late

Although FHA will be charging a slightly higher mortgage insurance
premium for certain categories of riskier transactions (e.g., borrowers
with low credit bureau scores and high LTVs), those transactions
referred by TOTAL are to be fully and properly underwritten.  The
increased premiums compensate FHA somewhat for the risk represented by
the combination of LTV and credit bureau score, but are not themselves
grounds for underwriter approval of a mortgage. The Refer decision from
TOTAL suggests that, absent additional factors that can be documented by
the underwriter, the credit risk of the loan may be too great FHA to
insure. Such mortgages, which may exhibit other risk-layering
characteristics beyond credit bureau score and LTV, are to be approved
solely on the underwriter's judgment of the likelihood of successful and
sustained homeownership, not on the insurance premium collected.  

If the underwriter approves a loan for which non-credit review rules are
triggered, i.e., excessive payment-to-income ratios and debt-to-income
ratios, the borrower will pay the mortgage insurance premium based on
the decision credit score and LTV ratio.  

**[First-Time Homebuyer with HUD-Approved Pre-Purchase
Counseling]{.underline}**

First-time homebuyers (as defined below) who will be obtaining a
mortgage with an LTV greater than 95 percent [and]{.underline} whose
decision credit score is in the 559-500 range are entitled to a
reduction of their upfront mortgage insurance premium from 2.25 percent
to 2.00 percent provided the homebuyer completes HUD-approved
pre-purchase counseling.

A first-time homebuyer is an individual who has had no ownership in a
principal residence during the 3-year period ending on the date of
purchase (closing date) of the property. A first-time homebuyer includes
any individual that has only owned with a former spouse while married
and also includes an individual who has only owned a principal residence
not permanently affixed to a permanent foundation, or a property that
was not in compliance with State, local, or model building codes and
cannot be brought into compliance for less than the cost of constructing
a permanent structure. If any of the occupant-owners on the mortgage
meet this definition, then the mortgage is considered as having been
made to a first-time homebuyer.

Pre-purchase counseling must be obtained from a HUD-approved housing
counseling agency, a participating agency of a HUD-approved housing
counseling intermediary or a state Housing Finance Agency receiving HUD
housing counseling grant funds, *and* the counseling [must]{.underline}
occur prior to execution of the sales agreement. With this requirement,
it is FHA's intent to encourage borrowers to participate in meaningful
counseling prior to the decision to purchase a home, not to create an
incentive or burden for lenders to have borrowers re-execute the sales
contract in order to receive a reduced premium.

The counseling may be completed up to one year before the homebuyer
signs a purchase agreement (executes a sales contract) for the subject
property. It must be one-on-one, face-to-face counseling unless a
hardship can be demonstrated, and then the counseling may be conducted
one-on-one over the telephone. The counseling must consist of, but is
not limited to:

-   Budgeting and credit, including an analysis of the household's
    unique financial/credit situation;

-   Assessing homeownership readiness, including an evaluation of home
    and monthly payment affordability;

-   Development of a written action plan outlining the steps the
    household and the counselor will take to help the household meet
    their goals;

-   Financing a home, including a discussion of alternative types of
    mortgage loans/features and special financing products, common
    lending documents, and steps in the loan application, approval, and
    closing processes;

-   Shopping for a home, including understanding the professionals
    involved in the process; and

-   Maintaining a home, including preventive maintenance, taxes, and
    insurance;    

Even if group sessions or homebuyer education classes cover the topics
above, they do not meet the level of one-on-one counseling needed to
receive the reduced mortgage insurance premium. To find a list of
housing counseling agencies, please visit the Department's website at
<http://www.hud.gov/offices/hsg/sfh/hcc/hccprof14.cfm>.

**[Programs Covered by Risk-Based Premiums]{.underline}**

Risk-based premiums and the requirements described in this mortgagee
letter apply to those forward mortgages insured under FHA's Mutual
Mortgage Insurance (MMI) fund, the Section 203(k) rehabilitation
mortgage insurance program, and individual condominium units insured
under Section 234(c). Risk-based premiums do not apply to mortgages
insured under Title I of the National Housing Act, nor to reverse
mortgages under FHA's Home Equity Conversion Mortgage (HECM). Risk-based
premiums also do not apply to Section 223(e)(declining neighborhoods),
Section 238(c)(Military Impact areas in Georgia and New York), Section
247 (Hawaiian Homelands), and Section 248 (Indian Reservations).

**[Refinance Transactions]{.underline}**

The mortgage insurance premium for refinance transactions will depend on
several variables. These include whether the refinance is of a
FHA-insured mortgage to another FHA-insured mortgage, as under FHA's
streamlined refinance options, is a rate-and-term refinance or is a
refinance under the *FHASecure* initiative. Except for streamlined
refinances and mortgage refinancing under the *FHASecure* initiative,
the new LTV and new decision credit score determine the mortgage
insurance premiums. Additional information is provided below:

[Full Qualifying Refinances]{.underline} (e.g., rate-and-term;
*FHASecure* refinance of a conventional mortgage not presently
delinquent; cash-out refinances; any that require complete
underwriting). These refinances are subject to the mortgage insurance
premiums based on the LTV and decision credit score for the refinance
application.

[Streamline Refinances]{.underline}. The mortgage insurance premiums
charged are subject to whether the existing FHA-insured loan being
streamline refinanced was charged premiums based on A) the pre-July 14,
2008 premium structure of 150/50 basis points or B) the post July 14,
2008 LTV/decision credit score premium schedule. The following
[examples]{.underline} illustrate the appropriate premiums that will be
charged for streamline refinances.

A.  *FHA-insured loans pre-July 14, 2008**/**Borrower paid 150/50 basis
    points*

-   Borrowers with an existing FHA-insured loan where the case number
    for the streamline refinance transaction was assigned before July
    14, 2008, will be charged 150 basis points upfront and 50 basis
    points annually. On subsequent streamline refinances where the case
    number is assigned on or after July 14, 2008 borrowers will be
    charged 100 basis points upfront and 50 basis points annually.

-   Borrowers with an existing FHA-insured mortgage where the case
    number for the streamline refinance transaction was assigned on or
    after July 14, 2008, will be charged 100 basis points upfront and 50
    basis points annually. On subsequent streamline refinances borrowers
    will be charged 100 basis points upfront and 50 basis points
    annually.

B.  *FHA-insured loans On or After July 14, 2008**/**Borrower paid
    Risk-based Premium*

-   Borrowers with an existing FHA-insured mortgage (purchase or full
    qualifying refinance transaction) where the case number for that
    existing mortgage was assigned on or after July 14, 2008, will be
    charged premiums on the subsequent streamline refinance transaction
    using the decision credit score and LTV for the existing mortgage
    being refinanced.

```{=html}
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```
-   If the streamline refinance transaction is "credit qualifying" (with
    or without an appraisal) premiums are based on the [new]{.underline}
    decision credit score and the LTV from the existing mortgage being
    refinanced.

Borrowers who refinanced their delinquent non-FHA ARM into an
*FHASecure* mortgage are [not eligible]{.underline} to streamline
refinance their *FHASecure* mortgage. The refinance transaction
subsequent to the *FHASecure* mortgage must be a full qualifying
refinance.

[Previous Case Number]{.underline}. To determine the case number of the
loan being refinanced, lenders may use the Case Query screen in FHA
Connection using the borrower's name, address and/or social security
number.

[Premium Feedback]{.underline}. The Case Number Assignment screen in FHA
Connection will provide a feedback message with the appropriate premium
to be charged for refinance transactions.

[Refund of Upfront Premiums]{.underline}. Refunds of upfront premiums
are available to borrowers refinancing to another FHA-insured mortgage
within a three-year time period, as shown below.

  ---------- --------------- ------- ------- ------- ------- ------- ------- ------- ------- -------- -------- --------
             **Upfront                                                                                         
             Mortgage                                                                                          
             Insurance                                                                                         
             Premium Refund                                                                                    
             Percentages**                                                                                     

             **Month of                                                                                        
             Year**                                                                                            

  **Year**   **1**           **2**   **3**   **4**   **5**   **6**   **7**   **8**   **9**   **10**   **11**   **12**

  **1**      80              78      76      74      72      70      68      66      64      62       60       58

  **2**      56              54      52      50      48      46      44      42      40      38       36       34

  **3**      32              30      28      26      24      22      20      18      16      14       12       10
  ---------- --------------- ------- ------- ------- ------- ------- ------- ------- ------- -------- -------- --------

On any refinance where the MIP refund exceeds the Upfront MIP required
on the new loan, the overage will be refunded directly to the borrower
from HUD. The lesser of the MIP refund or the new upfront MIP should be
subtracted from the unpaid principal balance before calculating the new
mortgage amount.

+------------------------------+---------------------------------------+
| **Type of Refinance**        | **Risk-Based Premium Information**    |
+------------------------------+---------------------------------------+
| Cash-Out Refinances          | Premiums based on new LTV and credit  |
|                              | bureau score/see premium matrix       |
+------------------------------+---------------------------------------+
| Rate-and-Term Refinance      | Premiums based on new LTV and credit  |
|                              | bureau score/see premium matrix       |
| (no cash out)                |                                       |
+------------------------------+---------------------------------------+
| FHA Secure/Not Delinquent    | Premiums based on new LTV and credit  |
|                              | bureau score/see premium matrix       |
+------------------------------+---------------------------------------+
| FHA Secure/Delinquent        | Premium is 2.25% upfront. Annual      |
|                              | premium is 55 basis points if LTV \>  |
|                              | 95%; otherwise, 50 basis points       |
+------------------------------+---------------------------------------+
| Streamlined Refinance of RBP | Premiums based on previous LTV and    |
| Loan                         | previous credit bureau score/FHA will |
|                              | provide feedback with initial         |
|                              | values/Any refund to be applied to    |
|                              | new upfront premium                   |
+------------------------------+---------------------------------------+
| "Credit qualifying"          | Premiums based on new credit bureau   |
| Streamlined Refinance        | score and previous LTV/FHA will       |
|                              | provide feedback with initial values/ |
|                              | Any refund to be applied to new       |
|                              | upfront premium                       |
+------------------------------+---------------------------------------+
| Streamline Refinance with    | Premium is 1.50 percent upfront and   |
| new case number assigned     | .50 percent annually/ Any refund to   |
| prior to July 14, 2008       | be applied to new upfront premium     |
+------------------------------+---------------------------------------+
| Streamline Refinance with    | Premium is 1.00 percent upfront and   |
| new case number assigned on  | .50 percent annually/ Any refund to   |
| or after July 14, 2008       | be applied to new upfront premium     |
+------------------------------+---------------------------------------+

**[15 Year and Shorter-Term Mortgages]{.underline}**

Mortgages with terms of 15 years or fewer have a slightly different
upfront and annual premium structure due to the risk shorter-term
mortgages represent. The mortgage insurance premium matrix is shown
below:

+------+------+------+--------+--------+--------+------+------------+
| FHA  |      |      |        |        |        |      |            |
| Si   |      |      |        |        |        |      |            |
| ngle |      |      |        |        |        |      |            |
| Fa   |      |      |        |        |        |      |            |
| mily |      |      |        |        |        |      |            |
| Mort |      |      |        |        |        |      |            |
| gage |      |      |        |        |        |      |            |
| I    |      |      |        |        |        |      |            |
| nsur |      |      |        |        |        |      |            |
| ance |      |      |        |        |        |      |            |
|      |      |      |        |        |        |      |            |
| Upf  |      |      |        |        |        |      |            |
| ront |      |      |        |        |        |      |            |
| Mort |      |      |        |        |        |      |            |
| gage |      |      |        |        |        |      |            |
| and  |      |      |        |        |        |      |            |
| An   |      |      |        |        |        |      |            |
| nual |      |      |        |        |        |      |            |
| Mort |      |      |        |        |        |      |            |
| gage |      |      |        |        |        |      |            |
| I    |      |      |        |        |        |      |            |
| nsur |      |      |        |        |        |      |            |
| ance |      |      |        |        |        |      |            |
| Prem |      |      |        |        |        |      |            |
| iums |      |      |        |        |        |      |            |
|      |      |      |        |        |        |      |            |
| [    |      |      |        |        |        |      |            |
| Loan |      |      |        |        |        |      |            |
| T    |      |      |        |        |        |      |            |
| erms |      |      |        |        |        |      |            |
| of   |      |      |        |        |        |      |            |
| 15   |      |      |        |        |        |      |            |
| Y    |      |      |        |        |        |      |            |
| ears |      |      |        |        |        |      |            |
| or   |      |      |        |        |        |      |            |
| Fe   |      |      |        |        |        |      |            |
| wer] |      |      |        |        |        |      |            |
| {.un |      |      |        |        |        |      |            |
| derl |      |      |        |        |        |      |            |
| ine} |      |      |        |        |        |      |            |
|      |      |      |        |        |        |      |            |
| *E   |      |      |        |        |        |      |            |
| ffec |      |      |        |        |        |      |            |
| tive |      |      |        |        |        |      |            |
| as   |      |      |        |        |        |      |            |
| of   |      |      |        |        |        |      |            |
| July |      |      |        |        |        |      |            |
| 14,  |      |      |        |        |        |      |            |
| 2    |      |      |        |        |        |      |            |
| 008* |      |      |        |        |        |      |            |
+------+------+------+--------+--------+--------+------+------------+
| All  |      |      |        |        |        |      |            |
| prem |      |      |        |        |        |      |            |
| iums |      |      |        |        |        |      |            |
| are  |      |      |        |        |        |      |            |
| s    |      |      |        |        |        |      |            |
| peci |      |      |        |        |        |      |            |
| fied |      |      |        |        |        |      |            |
| in   |      |      |        |        |        |      |            |
| b    |      |      |        |        |        |      |            |
| asis |      |      |        |        |        |      |            |
| po   |      |      |        |        |        |      |            |
| ints |      |      |        |        |        |      |            |
| (0.  |      |      |        |        |        |      |            |
| 01%) |      |      |        |        |        |      |            |
+------+------+------+--------+--------+--------+------+------------+
| **   |      |      |        |        |        |      |            |
| Deci |      |      |        |        |        |      |            |
| sion |      |      |        |        |        |      |            |
| Cr   |      |      |        |        |        |      |            |
| edit |      |      |        |        |        |      |            |
| S    |      |      |        |        |        |      |            |
| core |      |      |        |        |        |      |            |
| (FIC |      |      |        |        |        |      |            |
| O)** |      |      |        |        |        |      |            |
+------+------+------+--------+--------+--------+------+------------+
| **L  | **8  | **6  | **639  | **599  | **559  | **4  | **NON-TRA  |
| TV** | 50-6 | 79-6 | -600** | -560** | -500** | 99-3 | DITIONAL** |
|      | 80** | 40** |        |        |        | 00** |            |
+------+------+------+--------+--------+--------+------+------------+
| **≤  | 1    | 1    | 125/0  | 150/0  | 175/0  | 1    | 150/0      |
| 90.  | 00/0 | 00/0 |        |        |        | 75/0 |            |
| 00** |      |      |        |        |        |      |            |
+------+------+------+--------+--------+--------+------+------------+
| **9  | 10   | 12   | 150/25 | 175/25 | 200/25 | n/a  | 175/25     |
| 0.01 | 0/25 | 5/25 |        |        |        |      |            |
| -95. |      |      |        |        |        |      |            |
| 00** |      |      |        |        |        |      |            |
+------+------+------+--------+--------+--------+------+------------+
| **\> | 12   | 15   | 175/25 | 200/25 | 200/25 | n/a  | 200/25     |
| 95** | 5/25 | 0/25 |        |        |        |      |            |
+------+------+------+--------+--------+--------+------+------------+

**[Systems]{.underline}**

Lenders are reminded of the importance of data integrity to ensure that
the appropriate premium is charged and that the data submitted to TOTAL
and FHA Connection is accurate. Also, system edits will prevent lenders
from Streamline Refinancing *FHASecure* loans that were previously
delinquent non-FHA ARM loans.

**[Additional Information about FHA's Risk-Based Premiums]{.underline}**

-   Except for streamline refinances, premiums are the same for purchase
    [and]{.underline} refinance transactions, i.e., based solely on the
    decision credit bureau score and the loan-to-value ratio

-   There are no "add-ons" to the premiums or other adjustments to the
    mortgage insurance premiums for property type, e.g., multiple unit
    properties and mortgages on manufactured housing

-   The source of the downpayment is not a factor in determining the
    mortgage insurance premium

If you should have any questions concerning this Mortgagee Letter, call
1-800-CALLFHA.

Sincerely,

Brian D. Montgomery

Assistant Secretary for Housing-

Federal Housing Commissioner