A group of lawmakers led by Sen. Barbara Boxer (D-CA) and industry members are calling on the Federal Housing Administration to reduce mortgage insurance premiums faced by borrowers who take loans with FHA insurance.
In a letter sent last week to Department of Housing and Urban Development Secretary Julian Castro, Sen. Boxer and 17 colleagues requested of the housing chief that he ensure FHA loans are priced appropriately given the agency’s mission and the standing of its mutual mortgage insurance fund.
“With the improved outlook of the MMIF, we believe now is an appropriate time for the FHA to reexamine its premium levels to determine whether they can be reasonably and safely lowered,” the Senators wrote. “While preserving the solid footing of the reserve fund is essential, reducing fees does not necessarily conflict with this goal. As any business knows, just as a price that is set too high will lead to less profit, not more, lowering the premium on qualified borrowers may actually produce greater revenue and fully restore the capital ratio more quickly.”
After losses sustained during and after the housing crisis, the FHA’s MMI fund is back on the right track, the senators noted, citing an actuarial review of the fund that found it had a positive economic value of $4.8 billion at fiscal year-end 2014.
Industry members, including the National Association of Mortgage Professionals (NAMB), supported the lawmakers’ efforts.
“From an industry perspective, it makes sense for the FHA ,” said NAMB CEO Don Frommeyer in a public statement. “If premiums remain this high, the Administration will be flooded with mortgage applications by borrowers with lower credit scores, while those with better credit will finance through Fannie Mae and Freddie Mac. And of course, we support anything that makes homeownership more accessible and more affordable for consumers.”
Written by Elizabeth Ecker