FHA cuts mortgage costs for certain borrowers

Trump could reverse the reduction once he takes office

New York /
Jan.January 10, 2017 09:42 AM

The federal government is cutting mortgage insurance premiums for the first time in two years, a move that could make it easier for first-time homebuyers to borrow as they face rising interest rates.

The Federal Housing Administration is reducing the fees it charges to guarantee the mortgages it backs by a .25 percent point, bringing the annual cost for most borrowers to .60 percent of the loan balance, Bloomberg reported. According to HUD, the reduction could save new FHA-insured homeowners an average of $500 in 2017.

But first-time homebuyers — who tend to favor the government program — shouldn’t celebrate just yet. The cut may be reversed by President-elect Donald Trump TRData LogoTINY once he takes office. Republicans have traditionally opposed fee reductions, arguing that they hinder the FHA’s ability to handle mortgage defaults.

The change could also harm bond investors, since it speeds up repayment on certain securities, Bloomberg reported. Investors in Ginne Mae-backed mortgage bonds could also counter the fee cut by raising rates.

Some in the industry, however, praised the FHA’s decision.

“Dropping mortgage insurance premiums today will mean a whole lot more responsible borrowers are suddenly eligible to purchase a home through FHA,” William Brown, president of the National Association of Realtors, said in a statement. [Bloomberg] — Kathryn Brenzel


Related Articles

arrow_forward_ios
From left: 909 Third Avenue, 79 Fifth Avenue, 240 West 37th Street and 27 East 62nd Street (VNO, Cercone Exterior Restoration, Google Maps)
These were the largest Manhattan real estate loans in April
These were the largest Manhattan real estate loans in April
Lenders are being stingy about granting home equity lines of credit. (iStock)
Home values are up, but just try getting a line of credit
Home values are up, but just try getting a line of credit
(Getty)
Mortgage applications resume decline after one-week surge
Mortgage applications resume decline after one-week surge
Hispanics account for more than half of U.S. homeownership growth in the past decade despite making up only 18 percent of the population. (iStock)
Buenas noticias: Hispanic homeownership soars
Buenas noticias: Hispanic homeownership soars
Refinances made up 60 percent of all applications, up slightly from 59.2 percent the previous week. (iStock)
Mortgage rates dip, triggering surge in loan requests
Mortgage rates dip, triggering surge in loan requests
Freddie Mac’s economists said the slowdown will be caused by a hike in mortgage rates and limits on housing supply. (iStock)
Fannie, Freddie say housing market could see slight hiccup
Fannie, Freddie say housing market could see slight hiccup
Mortgage requests, refinancings continue to drop
Mortgage requests, refinancings continue to drop
Mortgage requests, refinancings continue to drop
1440 Broadway and One Park Avenue (Google Maps, Vornado)
These were the largest Manhattan real estate loans in March
These were the largest Manhattan real estate loans in March
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...