White House suspends Obama administration’s reduction in mortgage insurance premiums
The White House on Friday suspended a recent reduction of Federal Housing Administration (FHA) annual mortgage insurance premiums made by the Obama administration.
The Housing and Urban Development Department sent out a release saying that the plan to reduce the annual premiums (MIP) by 25 basis points, to .60 from .85, for most new mortgages would not go into effect.
There was no further explanation as to why the change was made.
David Stevens, president and CEO of the Mortgage Bankers Association, said he recognized the new 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 said.
The drop in the rate was set to go into affect for any buyers with a closing/disbursement date on or after Jan. 27.
Housing advocates had applauded the Jan. 9 decision amid rising mortgage rates.
FHA’s new premium rates were projected to save 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 former Housing and Urban Development Secretary Julián Castro when the plan was announced.
HUD decided to make the move because of the improving health of the FHA’s Mutual Mortgage Insurance Fund, which has gained $44 billion in value since 2012.
Last year, an independent actuarial analysis found the fund’s capital ratio grew by $3.8 billion and now stands at 2.32 percent of all insurance in force — the second consecutive year since 2008 that FHA’s reserve ratio exceeded the statutorily required 2 percent threshold.