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HUD Secretary: Reforms will not substantially impact affordable housing

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Raising the Federal Housing Administration's annual mortgage insurance premium 25 basis points will not have a dramatic impact on the affordability of homes in America, U.S. Department of Housing and Urban Development Secretary Shaun Donovan said Wednesday. The FHA announced the coming insurance-premium hike on Monday. While speaking to civil rights leaders during an affordable housing forum in Washington. D.C., Donovan said the FHA-insurance premium hike that takes effect on April 18 will raise prices on FHA-insured loans. However, he says it will not impact prices significantly enough to kill affordable homeownership opportunities, particularly when considering the counterbalance of today's low interest rates. Donovan told civil rights leaders the higher FHA insurance premiums are needed to ensure the agency remains a solid source of liquidity as the Treasury moves in the direction of reducing Fannie Mae and Freddie Mac's influence in the mortgage marketplace. "The truth is we are still too close for my comfort and the president's comfort to the edge in terms of the health of the FHA fund. We need to rebuild that fund to ensure it is there for communities," he added. While the forum was designed so civil rights leaders could discuss how the end of the GSEs will impact minority borrowers and communities, Donovan assured the crowd that an end to GSE-dominance is actually good for the market. "We do have to be honest that the prior system had fundamental flaws," he said. "We don't think it’s a good thing to have more than 90% of our mortgages guaranteed by the federal government in some form." He added, "it's a critical role that we play, but we are straining to keep up with this demand." Write to Kerri Panchuk.

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