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Is the FHA monthly mortgage insurance payment determined at the time the loan is written? I have a friend who streamlined her FHA loan in about 2012 (original FHA loan 2007). Her MI annual payment for the insurance was about $800.

Just now her loan company raised the mortgage insurance rate to $1800. They told her that there was a $950 escrow shortage and they were raising her monthly payment by $169 monthly for 12 months. Can they do this?

I forgot to say before that she was told that her escrow was short $950. She called her homeowners insurance which had not raised her premium. Real estate taxes have not gone up. She called her lender, they told her that the mortgage insurance premium went from $800 last year to $1800 this year. From what I'm reading, I thought that that rate was determined when you took out the loan and stayed stable.

Am I wrong? Is there anyone she could call (besides the lender) to inquire?

  • Yes, they can do this. It is very unfortunate but the same could happen with her regular insurance. In some states, such as Florida, the tax increases are capped at a max per year so the increases are more predictable and easier to plan. It may be cheaper to ask the bank if she can pay the $950 difference with a credit card or send in a payment which would probably be cheaper than paying $169 extra a month if you have a fairly low interest credit card. – Brian Aug 20 '14 at 10:22
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The escrow account for a mortgage will generally include property taxes, fire or homeowners insurance, and may include condo or community association dues.

PMI, or MIP insurance is type of insurance that protects the lender in case you go into default on the loan. That has nothing to do with Fire or Homeowners insurance.

The monthly payment to the mortgage company is made up of 4 parts: Principal, Interest, Mortgage Insurance, and Escrow.

If the mortgage insurance did really change then the mortgage servicing company will have the details. Ask for a copy of the statement from the Mortgage Insurance provider.

When performing a annual readjustment they should document each part of the payment including a determination of the lowest balance that they will have during the year.

The issue may be that they miscalculated the amount last year thus having a shortfall this year. Keep in mind that half of the $169 monthly bump will be to pay off the shortage and half will be to cover the new higher Mortgage Insurance payment. Next year thye monthly payment will decrease by ~$85 per month if nothing else changes.

  • I understand that. I forgot to say before that she was told that her escrow was short $950. She called her homeowners insurance which had not raised her premium. Real estate taxes have not gone up. She called her lender, they told her that the mortgage insurance premium went from $800 last year to $1800 this year. From what I'm reading, I thought that that rate was determined when you took out the loan and stayed stable. Am I wrong? Is there anyone she could call (besides the lender) to inquire? – Carolyn Aug 20 '14 at 0:05
  • You didn't answer the question. She asked, "Can they do this" and the answer is Yes. – Brian Aug 20 '14 at 10:21
  • The question conflated escrow which has home owners insurance with Mortgage Insurance which is not part of Escrow. Their comment now clarifies that even though they wrote the question that conflated the terms they had additional information. – mhoran_psprep Aug 20 '14 at 11:58

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