Cost-savings for home buyers purchasing a Federal Housing Administration (FHA)-backed mortgage loan was eliminated by the first executive order of the new Trump Administration. The move rolls back a premium rate cut of .25 percent that the U.S. Department of Housing and Urban Development announced early last week, which aimed to save borrowers, especially first-time homebuyers, hundreds of dollars a year on annual mortgage insurance premiums.
Center for Responsible Lending (CRL) senior researcher Sarah Wolff released the following statement:
The Administration’s actions will make it more difficult for low-to-moderate income borrowers to transition from renters to homeowners, particularly in an environment where conventional mortgage loans have become harder for the average consumer to access. An FHA loan is often the most important, affordable tool a family can use to purchase their home especially if they’re first-time homebuyers.
Over successive generations, FHA home loans have boosted our nation’s confidence in the American Dream. In more recent years, the availability and access to FHA-backed loans brought stability to a troubled marketplace, as it also adopted administrative reforms that ensured long-term financial solvency.
Mortgage protections developed by the Consumer Financial Protection Bureau and authorized by the Dodd-Frank Financial Reform Act provide yet another financial safety net for home buyers. No longer can consumers be sold loans they cannot afford; nor can mortgage brokers receive financial kick-backs for steering unsuspecting consumers into high-cost and unsustainable loans.
Low-wealth families with FHA-backed loans have actually performed better and resulted in fewer foreclosures than earlier loans issued by non-bank lenders that were backed by Wall Street investors. FHA’s stability and performance stand in stark contrast to the largely unregulated Wall Street investors whose focus was a short-sighted, high return.
Halting cuts to FHA premiums goes against providing families an opportunity to own a home and build wealth. The Administration should look for ways to help accomplish these two goals.
For more information, or to arrange an interview with a CRL spokesperson on this issue, please contact Ricardo Quinto at email@example.com.