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HUD Suspends FHA Mortgage Ins Premium Reduction
HUD suspends FHA mortgage ins. premium reduction
WASHINGTON – Jan. 20, 2017 – The Federal Housing Administration-insured (FHA) announced two weeks ago that it would cut mortgage insurance premiums on FHA loans – an add-on to the loans that helps compensate for loan defaults.
However, the cut that would have taken place on April 27 was suspended for an indefinite period of time on Friday. HUD announced the rule suspension in Mortgagee Letter 2017-1 shortly after President Trump's inauguration.
When FHA first announced a cut, the real estate industry applauded the move. National Association of Realtors®President William E. Brown called it "a question of simple math … Every time we cut the cost of mortgage insurance it means more borrowers meet the debt-to-income ratio required to purchase a home. It follows that dropping mortgage insurance premiums today will mean a whole lot more responsible borrowers are suddenly eligible to purchase a home through FHA."
An ATTOM Data Solutions analysis released Thursday found that the average U.S. borrower with an FHA loan would have saved an average $446 each year if the rate reduction had gone into effect.
While the lower-cost insurance program is essentially canceled for now, it's unclear if the Trump administration will revisit it in the future or allow it to sunset. Congress continues to consider the new president's Cabinet picks, including his choice to lead the Department of Housing and Urban Development (HUD), Dr. Ben Carson. HUD has oversight over FHA and its loan program.
FHA raised and lowered costs before
Following the Great Recession, FHA increased its monthly mortgage insurance premium from 55 basis points to 90 basis points; then, in April 2013, it increased them again due to post-recession concerns over credit risk and the need to strengthen FHA's Mutual Mortgage Insurance Fund (MMIF). At the time, however, NAR research found that an overall 80 basis point increase blocked 1.45 million to 1.65 million renters from becoming homeowners.
© 2017 Florida Realtors
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