The recent reduction in annual mortgage insurance premiums for Federal Housing Administration (FHA)-backed mortgages has been “suspended indefinitely,” the U.S. Department of Housing and Urban Development (HUD) announced in a mortgagee letter on Friday. The cut would have lowered premiums to 0.60 percent, saving FHA-insured borrowers with a closing date on or after Jan. 27, 2017 an average $500 this year.
“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,” the HUD letter read.
HUD Secretary nominee Ben Carson suggested the Trump Administration would address the reduction during his confirmation hearing earlier this month, telling a Senate committee the Obama Administration did not consult the Trump Administration about the cut until just prior to its announcement.
“Certainly, if confirmed, I am going to work with the FHA administrator and other financial experts to really examine that policy,” Carson said at the hearing.
The suspension—one of the first acts by the Trump Administration—is a setback for the housing industry, which welcomed the reduction as an opportunity to extend homeownership to 1 million conventionally uncreditworthy 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,” says National Association of REALTORS® President William E. Brown. “We’re disappointed in the decision but will continue making the case to reinstate the cut in the months ahead.”
“We hope HUD and the Trump Administration will make it a priority to quickly review the reduction in the FHA mortgage insurance premium,” says Geoff McIntosh, president of the California Association of REALTORS®. “FHA’s single-family home portfolio is financially sound as it has ever been, and we hope that once the new administration has thoroughly reviewed the merits of the premium reduction, the suspension will immediately be lifted.”
“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,” says David H. Stevens, president and CEO of the Mortgage Bankers Association (MBA). “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. 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.”
Suzanne De Vita is RISMedia’s online news editor. Contact her with your real estate news ideas email@example.com.