By KIMBERLEY HAAS
The Biden administration has announced a reduction on mortgage insurance premiums in a move they say could benefit an estimated 850,000 borrowers over the coming year.
New borrowers who take out loans insured by the Federal Housing Administration will see the effects of the reduced premiums, according to a press release.
The premiums will be reduced from 0.85% to 0.55% for most homebuyers, which could mean an estimated savings of $678 million for American families by the end of 2023, according to officials.
Vice President Kamala Harris and Department of Housing and Urban Development Secretary Marcia Fudge made the announcement in Bowie, Md., on Wednesday.
White House officials said the average homebuyer in Prince George’s County – where Harris and Fudge were – will save nearly $900 a year, based on the average home price of $300,000.
Fudge said in a statement released by officials at HUD that for the country to succeed, all Americans must have access to opportunity.
“That means expanding access to wealth-building and home ownership,” Fudge said. “Today, we are building on the steps we’ve taken to make homeownership more affordable, and HUD is acting to ensure people feel comfortable purchasing a home as they build toward their future. As we reduce housing costs for people with FHA mortgages, we continue our work to address longstanding disparities in homeownership.”
A fact sheet created by officials from HUD shows the forecasted cost savings in selected metropolitan areas where homeowners of color are underrepresented.
The reaction to the administration’s announcement has been mixed.
Tobias Peter, assistant director of American Enterprise Institute’s Housing Center located in Washington, DC., wrote in an opinion piece that the last time there was a large MIP cut, home prices grew in FHA neighborhoods instead of helping buyers.
“A MIP cut would amount to a massive wealth transfer from FHA’s capital reserve fund, which ultimately protects taxpayers, to realtors and homeowners in largely FHA neighborhoods. It is more than questionable how such a move ‘would help as many borrowers as possible’ since it has shown that it doesn’t help very many at all,” Peter wrote.
Scott Olson, executive director of the Community Home Lenders of America in Arlington, Va., commended the Biden administration and FHA Commissioner Julia Gordon.
“Long a top CHLA priority, an FHA premium cut is critically needed to insure minorities and other underserved borrowers have affordable access to mortgage credit, in a period of rising mortgage rates and homeownership affordability challenges,” Olson said.
NAR President Kenny Parcell agreed with the move, saying it would help potential buyers fighting to find an affordable home.
“NAR has continuously advocated for responsibly reducing mortgage insurance premiums to help qualified home buyers struggling with affordability in the current environment, and we applaud the Administration for this action,” Powell said in a statement.
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Troy Williamson, a senior loan officer at Cornerstone Home Lending, said that he is seeing the results of homebuyers flocking to the Sun Belt for warmer weather and a better quality of life. https://t.co/jJb5FseVyk
— The Mortgage Note (@TheMortgageNote) February 21, 2023
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