Politics: Finance
Obama to lower mortgage insurance fees
By Joseph Lawler | January 7, 2015 | 6:02 pm
President Obama will lower the fees charged on Federal Housing Administration-backed loans, a move meant to reduce mortgage costs for many first-time home buyers and boost the housing recovery.
The FHA will reduce annual mortgage premiums by 0.5 percentage points from 1.35 percent to 0.85 percent, the White House said Wednesday.
The FHA insures home lenders against default to increase the availability of mortgages and homeownership. The FHA has 4.8 million home loans in its portfolio.
The White House estimated that the fee reduction will translate into a $900 decrease in the annual mortgage payment for the typical first-time homebuyer.
President Obama and Housing and Urban Development Secretary Julian Castro are expected to discuss the rate cut and other changes in an appearance in Phoenix on Thursday.
A White House press release said the move would "help millions of families save billions of dollars in mortgage payments in the coming years, helping to support the housing market recovery."
In recent weeks, some housing groups and Senate Democrats have called on the White House to lower the fees to free up credit.
The FHA took on added market significance in the wake of the financial crisis as the private sector pulled back, and has raised its fees to high levels by historical standards to make up for losses on bad loans.
The FHA insures loans with down payments as low as 3.5 percent, making it popular with first-time borrowers. But in recent weeks it has faced the possibility that the government-sponsored enterprises Fannie Mae and Freddie Mac will cut into its business, following an announcement by their regulator that they could buy loans with down payments as low as 3 percent.
Fiscal conservatives have faulted the FHA for taking on risk and failing to meet statutory requirements related to cash reserves. By law, it is required to have 2 percent of its portfolio of guarantees held in reserve, but it hasn't met that requirement in years. Before the announced changes, the Obama administration did not expect it to meet the requirement before 2016. In 2013, the FHA required a $1.7 billion bailout from the Treasury.
"The federal government should be winding down its involvement in the mortgage business, not engaging in a race to the bottom," said Sen. Bob Corker, R-Tenn., in response to the announcement.
House Financial Services Chairman Jeb Hensarling, a Texas Republican, called the move "a grave mistake" that would put the FHA behind in rebuilding capital reserves. He noted that the committee plans to question Castro on the FHA's finances.
The Obama administration has taken a number of steps to loosen credit for home loans in recent years. Mortgage credit remains tight by historical standards, with many borrowers with irregular income or less-than-perfect credit scores having difficulty getting approved for a loan.
http://www.washingtonexaminer.com/obama-to-lower-mortgage-insurance-fees/article/2558329
