Trump suspends FHA mortgage insurance premium cut

African descent couple shows off key after purchasing a new home. 'Sold', 'For Sale' sign in background. Front entrance of this beautiful brick and stone home.
In one of his first decisions after taking office, President Trump suspended the FHA mortgage insurance premium cut announced earlier last week. One of the last acts of the Obama administration, the cut would have reduced the FHA mortgage insurance premium from 0.85 percent to 0.60 percent, and was set to go into effect on Jan. 27. The reduction would have made FHA mortgages slightly more affordable for some first-time buyers, and would have helped offset recent mortgage rate increases.
FHA provides mortgage insurance which protects lenders against defaults. Loans backed by the FHA have less strict lending requirements and are therefore popular with first-time home buyers. House Republicans had objected to the rate cut because it would have lowered the amount of funds available to the FHA to cover mortgage defaults. HUD Secretary Julian Castro said that the FHA reserves were healthy enough to withstand the decrease in revenue.
“According to our estimates, roughly 750,000 to 850,000 home buyers will face higher costs, and 30,000 to 40,000 new home buyers will be left on the sidelines in 2017 without the cut,” said National Association of Realtors president William E. Brown. “We’re disappointed in the decision but will continue making the case to reinstate the cut in the months ahead.”
However, Laurie Goodman, co-director of the Housing Finance Policy Center at the Urban Institute remains optimistic: “They didn’t have the time to study it so they rolled it back. It wasn’t a huge impact anyway. It was a marginal change.” Of the many ways to expand credit to borrowers, “this is really, really low on my list.”
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