PHOENIX—President Obama announced that the Federal Housing Administration (FHA) will reduce annual mortgage insurance premiums by 0.5 percentage point from 1.35% to 0.85% as part of an initiative to make homes more affordable.
According to the White House, for the typical first-time homebuyer, this reduction will translate into a $900 reduction in their annual mortgage payment.
“Existing homeowners who refinance into an FHA mortgage will see similar reductions to their mortgage payments as well,” the White House said. “In total, this action will help millions of families save billions of dollars in mortgage payments in the coming years, helping to support the housing market recovery. The new premium level is fully consistent with the FHA’s commitment to continue strengthening its financial health through growing reserves. At the same time, full documentation and continued strong underwriting means lending will remain prudent and sustainable – benefitting both homeowners and FHA.”
The President announced the reductions in Phoenix, which during the recession epitomized the yo-yo direction of home values and which had seen numerous foreclosures before home values began to rebound.
After the president’s announcement, CUNA CEO Jim Nussle issued a statement saying, “I’m pleased President Obama has made this move to make it easier for first-time home buyers to obtain a mortgage. CUNA has always taken seriously our responsibility to ensure that consumers are protected and their financial security remains as high has possible…The financial crisis caused by the nation’s biggest banks destroyed the finances of many hard-working families, but credit unions stood by their members and helped assist them with their mortgages to every extent possible. In fact, in 2009, credit unions saw their delinquency for mortgage loans peak at 1.61% compared to 8.86% at the banks – many who lured consumers into debt they could not afford.”
Credit unions were represented at the meeting by Bob Ramirez, president and CEO of Vantage West Credit Union in Tucson, Ariz., who was invited by the president to attend the event.
The fee-reduction plan is opposed by some, including Republicans who are noting the FHA’s insurance fund remains below legally required levels. Rep. Jeb Hensarling had earlier observed, “a broke FHA is a broken FHA.”
The FHA is required to keep enough cash on hand to cover all projected losses in its $1.1-trillion portfolio. The insurance fund required a $1.7-billion draw from the Treasury Department last year. In fiscal 2014, the fund posted its first positive balance in two years.
The White House said the plan is part of the President’s broader effort to expand responsible lending to creditworthy borrowers and increase access to sustainable rental housing for families not ready or wanting to buy a home. In the coming months the Administration said it will be taking additional steps to cut red tape and clarify lending standards to build on the measures announced today.
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