Final answer:
The policy for FHA loans made after June 2, 2013, mandates that annual MIP is generally required for the life of the loan if the initial loan-to-value ratio is over 90%; otherwise, it may be canceled at 78% LTV or after 11 years.
Step-by-step explanation:
For FHA loans made after June 2, 2013, the policy regarding the collection of annual MIP (Mortgage Insurance Premium) is that it is typically required for the entire life of the loan for most borrowers. This is particularly true if the initial loan-to-value (LTV) ratio is greater than 90%.
If the initial LTV ratio is 90% or less, the MIP may be required until the loan-to-value ratio reaches 78% or after 11 years, whichever occurs first.
Prior to this policy change, borrowers were able to cancel MIP when they reached 22% equity in their homes, regardless of the original loan-to-value ratio. The implementation of this policy ensures the financial stability of the FHA fund and provides an insurer for lenders in case of default.