HUD Suspends Reduction of FHA Mortgage Insurance Premiums

The Department of Housing and Urban Development (HUD) is suspending previous guidance that permitted a reduction of annual mortgage insurance premium rates for certain Federal Housing Administration (FHA) mortgages, the agency announced via Mortgagee Letter 2017-07 published Friday.

Effective immediately, Mortgagee Letter 2017-07 supersedes guidance published earlier this month that reduced the annual MIP by 25 basis points for FHA Title II forward mortgages with a closing/disbursement date on or after January 27, 2017.

“FHA is committed to ensuring its mortgage insurance programs remains viable and effective in the long term for all parties involved, especially our taxpayers,” states ML 2017-07. “As such, more analysis and research are deemed necessary to assess future adjustments while also considering potential market conditions in an ever-changing global economy that could impact our efforts.”

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The move arrives one week after HUD first announced the reduction, and just hours after President Donald Trump was sworn into the U.S. Presidency on Friday, January 20.

While Trump nominee for HUD Secretary Ben Carson has not yet been confirmed into this position, during a nomination hearing last week Carson said he would take a look at current housing policies, including the MIP reduction that was first announced just days before he appeared before the Senate Committee on Banking, Housing and Urban Affairs.

“Certainly, if confirmed, I’m going to work with the FHA administrator and other financial experts to really examine that policy,” Carson said during the hearing.

FHA plans to issue a subsequent Mortgagee Letter at a later date should this policy change.

Written by Jason Oliva

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  • Now the question becomes, how long before the Trump administration takes on the task of dealing with the HECM program.

    While many in our industry believe that the fiscal 2016 actuarial report vastly overstates the loss position of the HECM portion of the MMI Fund, most of us lack the justification for that position. Many point to FHA collecting billions in insurance premiums versus the amount of claims paid to date out of the MMI Fund but that form of cash accounting totally ignores how much of the amounts collected are to reimburse lenders for HECMs that will not terminate for some time to come.

    The actuaries simply are estimating in current dollars what the ultimate results of the current portfolio will be plus the actual results of the HECMs already terminated out of the HECMs endorsed after 9/30/2008. The question is how are the HECMs now in the pool of assigned HECMs being handled since none of their costs, post assignment MIP revenues or disposition proceeds are reflected in the MMI Fund until those loans are terminated.

    While some are working on the loss issue, the clock is running and the Trump administration is not standing idly by as reflected in its suspension of lower MIP premiums on newly endorsed forward MMI Fund mortgages on its first day in office. Our future is in the hands of the few.

  • I read my friend Jim Veale’s comment, many, good points did he bring out, as usual!

    However, this move to suspend the reduction of FHA mortgage insurance premiums, could be a move for the new President, his secretary of HUD and others to have the time to evaluate and review the MMI funds past and present activities as well as the actual state of condition the fund is in.

    Patients is a virtue, before jumping into the sea, make sure we know what is waiting for us when we hit the water!

    This my evaluation of why the suspension took place so quickly. Lets face it, the mortgagee letter came out the same day of our new President’s inauguration!

    John A. Smaldone
    http://www.hanover-financial.com

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