LPMI = Lender Paid Mortgage Insurance
- Mortgage Insurance that is paid by the lender via a higher rate to cover the cost of the MI
- Allows the client to add the cost of the mortgage insurance into the mortgage P&I payment
- Results in lower monthly payment due to lower MI cost
- Borrowers can possibly qualify for larger loan amounts than BPMI
- May be able to take advantage of increased tax deductions due to MI included in the interest rate
- No MI closing costs
- QM Eligible
How does LPMI impact QM?
As we know, points and fees paid at or prior to closing cannot exceed 3% of the loan amount (higher thresholds apply to loan amounts below $100,000).
- Any non-refundable MI premiums that are paid at or prior to closing must be included in the points and fees calculation.
- Any MI premiums paid after closing (i.e. – borrower paid monthly deferred and LPMI products) are excluded from the points and fees calculation.
- Any refundable MI premiums paid at or prior to closing are also excluded from the calculation, provided that:
- Refund must be pro rated and paid automatically at loan satisfaction
- Premiums cannot exceed the current upfront FHA MIP (1.75%). The portion of any refundable premium that exceeds 1.75% (paid at or prior to closing) counts towards the 3% cap.
How does LPMI work?
- Lender paid Mortgage Insurance is paid by REMN Wholesale via a higher Note rate.
- This allows the borrower to add the cost of the mortgage insurance into the mortgage P&I payment.
- The advantage to LPMI in regards to QM:
- The premium is paid after closing – so – no part of the premium is calculated in the 3% fee calculation
It’s all in the numbers!