HUD proposes uniform MIP rates to lower financing costs and boost rental housing development, simplifying FHA multifamily insurance programs.
The U.S. Department of Housing and Urban Development (HUD) recently proposed changes to the Mortgage Insurance Premiums (MIPs) for FHA Multifamily Insurance Programs.
This proposal aims to address current economic challenges and stimulate the development of rental housing across the country.
Background on MIP reductions
In 2016, HUD reduced MIPs for loans under three categories:
- Green and Energy-Efficient Housing
- Affordable Housing
- Broadly Affordable Housing
However, market-rate properties were left with significantly higher MIP rates.
Earlier this year, President Trump signed a presidential memorandum titled “Delivering Emergency Price Relief for American Families and Defeating the Cost-Of-Living Crisis,” which prompted HUD to propose reduced MIP rates for all loans under the FHA Multifamily Mortgage Insurance Program.
Over the past couple of years, rising construction costs and elevated borrowing rates have led to a decline in market-rate property loans. The proposed expansion of MIP cost-savings to all property types aims to lower financing costs and encourage rental housing development.
High MIPs have traditionally been a disadvantage for loans under these programs, and the proposed decrease seeks to provide a long-term debt solution for multifamily borrowers.
Details on proposed changes to MIPs
HUD’s proposal includes a uniform upfront capitalized MIP of 25 basis points for all FHA multifamily mortgage insurance programs, replacing the current range of 25 – 100 basis points. Additionally, the annual MIP would be reduced to 25 basis points from the current range of 25 – 95 basis points.
This uniform rate would eliminate the 2016 loan categories, including Green and Energy-Efficient Housing, Affordable, and Broadly Affordable, as they will be considered economically obsolete. The specialized requirements outlined in the 2016 rules for these categories would also be eliminated.
HUD believes that these changes will simplify the cost-benefit analysis for owners, developers, and lenders — reducing complications and stimulating multifamily development by lowering overall development costs.
The new MIP rates will apply to FHA multifamily mortgage insurance applications submitted or amended on or after the effective date of the notice, unless the loan has already been endorsed.
The proposed changes are open for public comment until July 28, 2025. It's crucial for our real estate industry colleagues to get involved and make their voices heard regarding these proposed changes. Your input can significantly impact the final decision and help align the new policies with the needs and concerns of our industry.
How CLA can help
Our team of real estate industry and affordable housing professionals is here to help you understand prospective and enacted regulations, tax, audit, Real Estate Assessment Center (REAC), or cost certification compliance. We also have experience with tax credit and HUD programs, and can provide customized strategies to meet your specific needs.