In order to encourage refinancing and revitalize the economy by eliminating the Mortgage Insurance Premium (MIP) on new FHA loans. Currently, on all 30 year FHA transactions MIP is required for the term of the loan. In the conventional landscape Private Mortgage Insurance (PMI) is only mandated for 2 years, or until an 80% LTV is reached.
By providing similar options on newly originated FHA as to the conventional lending scape. You will stimulate those with aged FHA loans to refinance, at least encourage FHA Streamline transactions. One of the beneficial factors of an FHA loan is the lower interest rates, though this benefit is diminished when the excessive MIP rates.
If eliminating the MIP revenue stream is not feasible - FEMAs piggy bank, etc. I would suggest incorporating a sliding scale based upon the length paid on the loan and LTV. This will aid, those looking to refinance by creating a payment similar to their current - even though the rate increases, the decrease in MIP offsets the potential increase. Additionally, it will provide benefit as the loan terms, the payment will decrease, this will increase affordability.
Additionally to ease the decrease in revenue, enact a plan similar to the IRRR where in there in increasing the Up Front MIP for subsequent uses. Utilization should be tied to the SSN’s, thus ensuring Non Occupying Co-Borrowers have consequences for their utilization as well.