The FHA will reduce its annual mortgage insurance premium from 1.35% to 0.85%, the White House announced Wednesday.
"For the typical first-time homebuyer, this reduction will translate into a $900 reduction in their annual mortgage payment," the White House said. "Existing homeowners who refinance into an FHA mortgage will see similar reductions to their mortgage payments as well. In total, this action will help millions of families save billions of dollars in mortgage payments in the coming years, helping to support the housing market recovery."
The move came on the same day CUNA and NAFCU joined more than 40 organizations to ask Housing and Urban Development Secretary Julia Castro to lower the FHA insurance premiums.
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The FHA has traditionally been the insurer for first time homebuyers and low- and moderate-income mortgage borrowers. Pressure to make certain the agency's insurance fund remained adequately capitalized forced the FHA to raise its insurance rates to a place where, the organizations said, the insurance had effectively become too expensive for many would-be borrowers.
"However, considering FHA's significant drop in volume and market share in recent years, it appears that the premium increases have kept many potential borrowers on the sidelines," the groups wrote in their Jan. 7 letter.
"Indeed, the premium increases may be hurting the financial condition of the fund, not helping it. Since 2011, annual insurance premiums have increased by nearly 150%, while its upfront fees have risen by 75%. The increases in the annual insurance premium have had the most significant impact on loan affordability … although the recent Actuarial Review notes that FHA collected $11 billion in premiums above expected losses in FY2014, the reduced volume of FHA originations directly translates into a slower rate of recapitalizationfor the MMI Fund," they wrote.
In addition to CUNA and NAFCU, the coalition included consumer organizations, civil rights organizations and mortgage lending organizations.
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