While the Federal Housing Administration’s Homeowners Armed with Knowledge (HAWK) pilot program is a good start to reducing high mortgage insurance premiums, the National Association of Realtors says the agency still has more work to do.
“NAR supports FHA’s efforts to reduce premiums through the HAWK program, but is concerned that HAWK will not reach enough qualified home buyers and the reduction in rates is not significant enough,” the trade organization writes in a letter to the FHA.
Through the HAWK program, which will be implemented in two phases over four years, first-time home buyers will complete pre-contract, pre-closing and post-closing housing counseling that would qualify them for a nearly $10,000 discount over the life of their mortgage.
According to the Department of Housing and Urban Development’s calculations, on a $180,000 mortgage, monthly payments would be reduced by $21 per month for the first two years and an additional $21 per month in the 25th month of the loan.
“While any amount helps, many qualified home buyers will still not be able to achieve homeownership unless insurance premiums come down more,” NAR writes. “Since 2010, mortgage payments have increased $122 per month on a $180,000 FHA-insured loan.”
This jump in payments, the NAR writes, is due to an 80 basis point increase in the annual premium and a 75 basis point increase in the upfront premium since 2010.
“The reductions in mortgage insurance premiums for HAWK are a start, but they don’t go far enough to make home purchases more affordable,” the trade organization writes.
To remedy this cost, NAR suggests the FHA increase the upfront premium and lower the annual mortgage insurance premium for all qualified FHA borrowers. The agency could also offer more reductions for home buyers participating in the HAWK program, NAR says.
NAR’s letter comes after the organization urged the FHA in April to lower its mortgage insurance premiums, saying that the high rates make home purchases “out of reach” for many qualified borrowers.
To read the NAR letter, click here.
Written by Emily Study