FHA Insurance Denied After Closing

[Christopher Grobbel]

We closed on a property in April. Our lender just reached out and informed us the FHA is refusing to insure the loan. This means our lender is kind of stuck and the loan is going to stay on their books.

They want the loan off their books and have offered to pay refinance costs with another private lending program. The refinance would be slightly beneficial initially on the monthly payment, but we would lose out over the long term because of the FHA structure - you gradually pay less and less PMI over the life of the loan.

I feel like this is a really unique situation as I have researched online and haven't been able to find any relevant information. Here are my questions:

• What happens to the PMI if we don't refinance and keep the initial FHA? We are currently paying a lot in PMI. If the FHA is not insuring the loan, does the PMI fall off?
• What options do we have or what should we use to trying and negotiate a better deal with our lender?  We like the lender and don't want to screw them.  We do however want to get the best deal for ourselves. 

Would really appreciate any informed responses here.  Happy to speak more in direct message or over the phone if it would be helpful. 

Thanks,

Chris 

[Wayne Brooks]

@Christopher Grobbel MIP on an fha doesn't gradually fall off, or get reduced.

For loans of greater than 90% the MIP is for the life of the loan.

For loans of 90% ltv or less, the MIP ends after 11 years.

For MIP to be $860/mo your loan would have to be over $1M