President Obama announced his plan to have the Federal Housing Administration lower mortgage insurance premiums by 50 basis points.
Speaking at a Phoenix high school late Thursday morning, Obama said he is directing the Federal Housing Administration to reduce annual mortgage insurance premiums by 50 basis points, from 1.35% to 0.85%.
The move, first reported by HousingWire Wednesday, comes despite concerns from the other side of the aisle over its effectiveness whether it would affect FHA's fiscal standing.
“The thing I’m going to be announcing today is a new policy in which the fees that are charged by the FHA for loans are going to be reduced and could save a family like this, one that’s buying through FHA a home, could save them as much as $900 a year, which obviously makes a big difference if their payment is $900 a month,” Obama said.
He went on to say it could be substantial for some.
“It could be a full month’s payment that they’re saving, and that could make all the difference for a family that is owning its first home,” he said.
Zillow released an independent breakdown of what a 50 bps reduction would mean for first-time homebuyers.
However, the announcement is being received with sharply divided opinions on its ultimate effectiveness.
House Financial Services Committee Chairman Jeb Hensarling, R-Texas, said the move would push the housing market closer to another bust, even as it struggles to recover. Congresswoman Maxine Waters (D-CA), Ranking Member of the Financial Services Committee, however praised the action as critical for the nation’s homebuyers.
“A fiscally sound FHA, with a clearly defined mission, ensures homeownership opportunities for creditworthy first-time homebuyers and low-income families. Any effort to lower FHA premiums would be counterproductive to achieving these goals and would place the U.S. taxpayer at greater risk,” Hensarling said.
Waters, however, said, "Although Republicans will roundly criticize this move, it’s important to remember that FHA is far from bankrupt, holding approximately $40 billion in reserves and continuing to generate revenue."
Here’s a roundup of what was said through Twitter.
POTUS makes his first speech on housing in the new year today. The key question is whether the decrease in FHA premiums matters for 2015.— Nela Richardson (@NelaRichardson) January 8, 2015
Obama speaks in Phoenix on housing: "Right now Michelle and I live in rental housing. … We’ve got two years remaining on our lease."— Dina ElBoghdady (@DinaWaPo) January 8, 2015
"Starting this month, we will lower the annual insurance premium enough to save the average homeowner more than $900 a year" #ObamaInPhoenix— Brena Swanson (@BrenaSwansonHW) January 8, 2015
Breaking: Obama does not know what FHA stands for, calls it the "Federal Housing Authority."— Rob Blackwell (@ABWashBureau) January 8, 2015
"Healing the housing market would not be easy but we were going to act quickly" #ObamaInPhoenix— Brena Swanson (@BrenaSwansonHW) January 8, 2015
Key challenge for WH on housing: they want prices to go up to help people escape negative equity. But rising prices hurt affordability.— Nick Timiraos (@NickTimiraos) January 8, 2015
"REALTORS strongly support Obama’s plan to reduce annual mortgage insurance premiums on FHA home loans." - Chris Polychron, NAR President— NAR Leadership (@narleadership) January 8, 2015
And here is a quick recap of HousingWire's coverage: