With the recent increased interest in FHA loans, we have received many questions regarding the impact of high cost tests on certain fees and charges, including upfront mortgage insurance premiums (MIP) paid by borrowers in connection with FHA loans.  For purposes of the federal Section 32 and most state-specific high cost tests, the fact that the loan is HUD-insured has no impact on the respective high cost tests: finance charges (including MIP) paid to HUD are points and fees and, consequently, are included in the high cost tests.  However, some state-specific high cost tests apply different rules.

 

The following is a list of those states that offer some type of exclusion from their respective high cost tests for either FHA loans or some or all FHA fees, including MIP:

 

High Cost Tests That Exclude FHA Loans: Arkansas, District of Columbia, Indiana, Minnesota and Tennessee.

 

High Cost Tests That Exclude Fees and Charges (including MIP), if Paid to HUD: Connecticut1, Georgia, Kentucky, Maine (but only up to 1 point), Ohio and South Carolina.

 

High Cost Tests That Exclude Mortgage Insurance Premiums Generally: New Jersey, and New York.

 

Except as indicated above, absent some other independent basis for excluding the fee or charge from a high cost test, finance charges, including upfront MIP, are points and fees for purposes of a state's high cost test and the federal Section 32.