Citing a growing concern that homebuyers may be priced out of the market by the Federal Housing Administration’s mortgage insurance requirement, Steve Brown, president of the National Association of Realtors, sent a letter to FHA Commissioner Carol Galante asking the FHA to relax its mortgage insurance rules.
“I am writing on behalf of the one million members of the NAR with concerns about the FHA’s high annual mortgage insurance premiums and mortgage insurance that is required for the life of the loan,” Brown says in his letter. “Home purchases are becoming increasingly out of reach for many qualified borrowers who rely on FHA financing.”
Brown cites the losses suffered by the FHA’s Mutual Mortgage Insurance Fund during the housing crisis. “Now that the MMI Fund is on a path to recovery, NAR urges FHA to lower the annual mortgage insurance premiums and eliminate the requirement that mortgage insurance is held for the life of the loan,” Brown says. “This will slow the rate of prepayments that are having a negative effect on the fund.”
Brown’s letter says that in 2014, FHA fees make up nearly 25% of a monthly mortgage payment. On a $150,000 loan, at 4.5%, the mortgage payment is 13% higher today than it was in 2008.
Brown’s letter claims that as many as 125,000 to 375,000 prospective buyers were priced out of the market in 2013 by the FHA’s high insurance premiums and mortgage insurance requirement.
Read Brown's full letter here.