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Homebuyers

One of Trump's First Orders Means Home Loan Fees Won't Go Down

Source: CALIFORNIA ASSOCIATION OF REALTORS® 

Friday was the day that many homebuyers across the country were to start saving on average $500 a year on their loans. A fee reduction was set to go into effect at the Federal Housing Administration, lowering the cost of nearly 1 million FHA loans per year.

But that's not going to happen, at least for now, because in his very first hours in office, President Trump issued an order suspending that fee cut.

The Obama administration had authorized the fee reduction for FHA loans earlier this month. Trump's order says it is now "suspended indefinitely." The Trump administration could ultimately allow it to go through, but the order states "more analysis and research are deemed necessary."

Geoff McIntosh, president of the CALIFORNIA ASSOCIATION OF REALTORS©, said his group was disappointed by the Trump administration's move. "It would have made a difference to California homebuyers of about $860 a year," McIntosh told NPR.  

Making sense of the story

  • The higher the price of the home, the greater the savings since the fee in question was to be cut by 0.25 percentage points of the total amount borrowed; on a $400,000 home loan, the savings would be $1,000.
  • Why would the new administration want to keep that money out of Americans' pockets? The order doesn't say precisely. But some conservatives had warned that cutting the fees for FHA borrowers might leave taxpayers on the hook in another housing crash.
  • "FHA insures over $1 trillion in outstanding mortgage loans," says Ed Pinto, co-director of the American Enterprise Institute's Center on Housing Risk. He sees that as a potentially ominous liability given the FHA's cash reserves.
  • Other analysts disagree and say the FHA is once again on strong financial footing and they say the fee cut was justified.

Listen.

Industry Reacts: Is Trump's Suspension of FHA Mortgage Insurance Premium Cut Good or Bad?

Source: HousingWire

The Department of Housing and Urban Development’s decision to suspend the reduction of Federal Housing Administration mortgage insurance premiums didn’t come as a shocker.
FHA mortgage insurance premiums have been under heightened scrutiny ever since the FHA’s flagship fund, the Mutual Mortgage Insurance Fund, reached its Congressionally mandated threshold of 2 percent ahead of schedule in November 2015.

 
The cut will have an impact on future borrowers, said National Association of Realtors President William Brown. 

“According to our estimates, roughly 750,000 to 850,000 homebuyers will face higher costs and 30,000 to 40,000 new homebuyers will be left on the sidelines in 2017 without the cut,” Brown said. “We’re disappointed in the decision but will continue making the case to reinstate the cut in the months ahead.”

“We hope HUD and the Trump administration will make it a priority to quickly review the reduction in the FHA mortgage insurance premium,” said CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) President Geoff McIntosh. “Homebuyers in California, who would have saved an average of $860 a year, will be negatively impacted more than any other state by the decision to not reduce the FHA premium.”