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.