In one of his final acts as the head of the Department of Housing and Urban Development (HUD), Secretary Julián Castro announced the Federal Housing Administration (FHA) will reduce the annual premiums by 25 basis points for most new mortgages with a closing or disbursement date on or after Jan. 27.
In a statement issued by HUD, the decision to lower premium rates “reflects the fourth straight year of improved economic health of FHA’s Mutual Mortgage Insurance Fund (MMIF), which gained $44 billion in value since 2012.” The adjusted premium rates are projected to save new FHA-insured homeowners an average of $500 this year.
“After four straight years of growth and with sufficient reserves on hand to meet future claims, it’s time for FHA to pass along some modest savings to working families,” said Castro. “This is a fiscally responsible measure to price our mortgage insurance in a way that protects our insurance fund while preserving the dream of homeownership for credit-qualified borrowers.”
David H. Stevens, president and CEO of the Mortgage Bankers Association (MBA), welcomed the announcement.
“The reduction in the premium is a result of our industry’s and FHA’s shared commitment to quality underwriting, and consumers will benefit as result,” said Stevens, who served as FHA Commissioner in the first term of the Obama Administration. “Reducing the cost of FHA loans benefits borrowers, but other changes to reduce uncertainty for lenders would be required to truly invigorate the FHA program. MBA looks forward to continuing to work with all stakeholders, including the new Administration, to ensure the safety and soundness of the FHA program.”
“FHA mortgage products exist to serve an important mission: providing homeownership opportunities to creditworthy borrowers who are overlooked by conventional lenders,” said National Association of Realtors (NAR) President William E. Brown, a Realtor from Alamo, Calif. and founder of Investment Properties. “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.”
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