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Black homeownership group, MBA call for MIP cut

Ending the life of loan requirement would contribute to wealth building, Black Homeownership Collaborative says

The Mortgage Bankers Association and fellow trade group the Black Homeownership Collaborative have joined the chorus of voices imploring HUD Secretary Marcia Fudge to reduce mortgage insurance premiums (MIPs) and suspend life-of-loan requirements for borrowers with FHA-insured loans.

The trade groups last week sent a letter to Fudge noting that since the start of the pandemic, the cost of buying a home has skyrocketed.

“Less than three years ago, a salary of $64,400 per year was sufficient to purchase the median-priced home of $329,000 with a 3.31% interest rate,” the letter said. “Today, between much higher home prices and double the interest rate on a 30-year fixed-rate loan, a salary of more than $120,000 is necessary to purchase that very same home.”

The BHC and MBA added: “Lowering the annual MIP would help reduce the cost of buying a home with an FHA mortgage, and ending the life of loan requirement would contribute to building wealth through homeownership in the Black community.”

This is just the most recent letter the MBA has written to federal officials requesting a cut to mortgage insurance premiums. In September, the MBA wrote to the National Economic Council. The MBA noted that the FHA’s Mutual Mortgage Insurance Fund (MMIF) capital reserve ratio is four times the statutory minimum reserve ratio.

“Lowering the MIP – with a focus on FHA’s recurring ‘annual’ premium – increases homebuyers’ purchasing power by reducing monthly payments and directly putting money into their pockets every month, giving them the opportunity to become homeowners and build generational wealth,” the MBA said in its letter to the NEC. “As economic conditions continue to worsen, reducing the MIP also allows borrowers the flexibility to spend on necessary items like food, gas, education, and other monthly bills.”

Lowering MI premiums would help FHA products remain competitive in the current market, the MBA said in its letter.

Members of the Black Homeownership Collaborative include the National Association of Real Estate Brokers, the National Association of Realtors, the National Fair Housing Alliance, the National Housing Conference and the National Urban League.

The annual MIP stands at 85 basis points for most FHA loans and hasn’t been reduced since the Obama administration in 2015.

Industry groups have been frustrated at the FHA’s decision to withhold a mortgage insurance premium cut, which HUD officials in July attributed to “budgetary implications, tradeoffs within appropriations process and the FHA’s role in the broader housing system.”

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