Last week, the Federal Housing Administration announced it will cut its annual mortgage insurance premiums, likely resulting in about $900 in savings for borrowers and potentially opening the door to thousands of new buyers. But there are no further FHA fee reductions under consideration, Julian Castro, secretary of the U.S. Department of Housing & Urban Development, told a crowd at the National Press Club on Tuesday.
The FHA decided to reduce its annual mortgage insurance premium fees from 1.35 percent to 0.85 percent because its Mutual Mortgage Insurance Fund for single-family programs was “back in the black.” In his speech, Castro cited National Association of REALTORS® research that estimated that nearly 400,000 creditworthy borrowers were being priced out of the housing market in 2013 due to the high premiums.
“We expect our premium reduction to help more than 2 million borrowers save an average of $900 annually over the next three years,” Castro told the crowd. “It will also encourage nearly a quarter-million new borrowers to purchase their first home.”
Castro discounted criticism that the reduction in rates will lead to fueling loans to irresponsible borrowers and mark a return of the housing crisis. The lending environment is still too tight and a “sensible balance” is needed between overly relaxed standards and those that are too stringent, Castro said.
“Our nation is smart enough to heed the lessons of the past without forsaking our future. … The answer isn’t to deny responsible Americans home ownership — it’s to do it right,” Castro told the crowd.
Despite the rate reduction, FHA premiums will remain 50 percent higher than precrisis levels.
“This premium change only makes an FHA loan more affordable for qualified families,” Castro said. “All other FHA requirements will remain the same, including verification of a person’s ability to pay. Families still have to qualify for an FHA loan, but when they do, they will find a more affordable path to home ownership waiting for them.”
Source: “Castro: No Further FHA Fee Reductions Under Consideration,” HousingWire (Jan. 13, 2015)