The Department of Housing and Urban Development’s decision to suspend the reduction of Federal Housing Administration mortgage insurance premiums didn’t come as a shocker.
FHA mortgage insurance premiums have been under heightened scrutiny ever since the FHA’s flagship fund, the Mutual Mortgage Insurance Fund, reached its Congressionally mandated threshold of 2% ahead of schedule in November 2015.
The news came as a surprise since the MMIF reaching 2% went directly against speculation that Former President Obama’s decision in January 2015 to reduce the FHA’s annual mortgage insurance premiums by 50 basis points would negatively effect the health of the MMIF.
Then, in January of this year as the Obama administration prepared to leave office, FHA announced that it was cutting its annual mortgage insurance premiums again.
But after Ben Carson, Trump’s choice to lead the Department of Housing and Urban Affairs, appeared last week before the Senate Committee on Banking, Housing, and Urban Affairs, the likelihood that the cut would take effect on Jan. 27 quickly diminished.
And on top of that, earlier this week, sources told HousingWire that the Trump administration would do more than just “examine” the FHA premium cut once Trump is sworn on.
The controversy and uncertainty surrounding FHA MIPs has left the industry divided.
"We recognize the Administration’s need to examine the overall health of the insurance program and weigh that against the benefits of lowering mortgage insurance premiums. Given that lenders have already started preparing for the MIP decrease, it is important that any new policy be implemented in a way that minimizes disruption for borrowers and lenders,” said David Stevens, president and CEO of the Mortgage Bankers Association.
Scott Olson, the Community Home Lenders Association’s executive director, is hopeful that the cut will stick around after review.
"Based on the prior administration’s lack of communication on the FHA premium reduction, we believe the decision to review such action prior to implementation is prudent. We are confident the review will support a premium cut," said Olson.
"Our hope is the Administration will conduct a comprehensive review of housing policies and implement changes that will help millions of Americans who have been left out of homeownership for far too long,” continued Olson.
The cut will have an impact on future borrowers said National Association of Realtors President William Brown, “According to our estimates, roughly 750,000 to 850,000 homebuyers will face higher costs and 30,000 to 40,000 new homebuyers will be left on the sidelines in 2017 without the cut. We’re disappointed in the decision but will continue making the case to reinstate the cut in the months ahead.”
“We hope HUD and the Trump administration will make it a priority to quickly review the reduction in the FHA mortgage insurance premium,” said California Association Of Realtors President Geoff McIntosh. “Homebuyers in California, who would have saved an average of $860 a year, will be negatively impacted more than any other state by the decision to not reduce the FHA premium.