The U.S. Department of Housing and Urban Development’s (HUD) announced this week that it will reduce annual insurance premiums on most Federal Housing Administration (FHA) mortgages, which drew praise, and some criticism from federal lawmakers.
Congresswoman Maxine Waters (D-CA) supported HUD’s decision to reduce premiums by 25 basis points, which is expected to save new FHA-insured homeowners an average of $500 in 2017. She praised HUD Secretary Julián Castro leadership in expanding homeownership to low income, minority families, and first-time buyers.
“Under Secretary Castro’s leadership, the FHA has experienced four straight years of improved economic health, with a gain of $44 billion in value since 2012 and a capital ratio that exceeds the statutorily mandated amount,” Waters said. “So I am very pleased that he has taken appropriate steps to ensure that FHA borrowers are not unduly burdened with premiums that add to their monthly housing costs.”
This is the second premium reduction under Secretary Castro.
David Stevens, president and CEO of the Mortgage Bankers Association, said the move will benefit consumers.
“Reducing the cost of FHA loans benefits borrowers, but other changes to reduce uncertainty for lenders would be required to truly invigorate the FHA program,” Stevens said. “MBA looks forward to continuing to work with all stakeholders, including the new Administration, to ensure the safety and soundness of the FHA program.”
However, House Financial Services Committee Chairman Jeb Hensarling (R-TX) said HUD’s decision to lower premium is counterproductive.
“It seems the Obama administration’s parting gift to hardworking taxpayers is to put them at greater risk of footing the bill for yet another bailout,” Hensarling said. “Just three years ago the taxpayers had to spend $1.7 billion to bail out the FHA. Lowering premiums to below market rates now only puts the FHA in a more precarious financial condition.”
Hensarling added that in order for the FHA to be successful, it “must be fiscally sound, with a clearly defined mission, to ensure homeownership opportunities for creditworthy first-time homebuyers and low-income families. Lowering FHA premiums now is counterproductive to achieving these goals and puts the U.S. taxpayer at greater risk.”