Trump Suspends FHA Mortgage Insurance Premium Reduction
Real Estate In-Depth | January 25, 2017
WASHINGTON—A cut in the FHA annual mortgage insurance premium announced in the final days of the Obama Administration earlier this month, was “suspended indefinitely” in the initial hours of the new Trump Administration.
The move was part of a host of executive orders issued by President Donald Trump in his first week in office that also included moves to advance the controversial Keystone and Dakota pipelines, the scale back of some provisions of the Affordable Care Act, also known as “Obamacare,” and withdrawing the U.S. from the Trans-Pacific Partnership trade deal.
The FHA on Jan. 9th announced a further reduction in its annual mortgage insurance premium from 0.85% to 0.60%. Mortgage bankers and other housing organizations, including the National Association of Realtors, heralded the reduction.
However, on Jan. 20, the FHA under President Donald Trump, issued a Mortgage Letter that announced the planned annual FHA mortgage insurance premium reduction that was to go into effect on Jan. 27th was “suspended indefinitely.”
Genger Charles, General Deputy Assistant Secretary of Housing, stated in the mortgage letter: “FHA is committed to ensuring its mortgage insurance program remains viable and effective in the long term for all parties involved, especially our taxpayers. As such, more analysis and research are deemed necessary to assess future adjustments while also considering potential market conditions in an ever-changing global economy that could impact our efforts.”
National Association of Realtors President William Brown said in a statement that the suspension of the rate cut would impact some homebuyers. “According to our estimates, roughly 750,000 to 850,000 homebuyers will face higher costs and 30,000 to 40,000 new homebuyers will be left on the sidelines in 2017 without the cut,” he stated. “We’re disappointed in the decision but will continue making the case to reinstate the cut in the months ahead.”
David H. Stevens, president & CEO Mortgage Bankers Association, reacted to the rate cut suspension by stating, “We recognize the Administration’s need to examine the overall health of the insurance program and weigh that against the benefits of lowering mortgage insurance premiums. Given that lenders have already started preparing for the MIP decrease, it is important that any new policy be implemented in a way that minimizes disruption for borrowers and lenders.”
He continued, “MBA looks forward to working with the new Administration to ensure the long term stability of the FHA program, creating an environment that provides clarity in regulations for lenders while at the same time promoting access to credit and protecting consumers.”
NAR was one of the groups that praised the FHA insurance premium rate cut earlier this month, stating that the move “breathes new life into the program.”
NAR President Brown noted at the time, “The high cost of mortgage insurance has unfortunately put those opportunities out of reach for many young, first-time- and lower-income borrowers. Now, we have a real opportunity to get back on track.”