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Are Mortgage Insurance Premiums for FHA loans excluded from the prohibition of financing as noted in Regulation Z 1026.36?
Mortgage insurance premiums as defined by FHA are not included in the prohibition of financing in 1026.36(i)(2). This prohibition applies to credit insurance which generally insures a consumer in the event of a specified event, and the benefit provided is to make the consumer’s periodic payments while the consumer is unable to make them.
FHA requires two types of mortgage insurance premiums: upfront premium (UFMIP) can be paid as a lump sum at closing, or rolled into the loan. Either way, it’s a one-time payment. The annual mortgage insurance premium is a recurring expense that has to be paid for the life of the loan in some cases.
Here is a link to a blog article from the FHA Handbook that describes the insurance requirements under FHA.
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