Mutual Mortgage Insurance Fund

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DEFINITION of 'Mutual Mortgage Insurance Fund'

A fund that insures mortgages made by the Federal Housing Administration (FHA) on single-family homes. Mortgagors pay into the fund with a one-time premium of 1.5% of the loan amount, paid at closing, and annual mortgage-insurance premiums of 0.5% of the loan amount, which must be paid until the mortgagor has 22% equity in the home.

The Mutual Mortgage Insurance Fund pays the lender if the mortgagor defaults. Borrowers who have FHA mortgages are considered higher risk because of the low down-payment requirement and looser income and credit requirements on FHA loans.

BREAKING DOWN 'Mutual Mortgage Insurance Fund'

The Mutual Mortgage Insurance Fund is authorized by Section 203(b) of the National Housing Act of 1934. The other funds operated by the FHA are the Cooperative Management Housing Insurance Fund, the General Insurance Fund and the Special Risk Insurance Fund.

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