Reduction to increase credit affordability and reflects improved economic health of FHA
As the nation's housing market continues to improve, U.S. Housing and Urban Development Secretary Julián Castro announced the Federal Housing Administration will reduce the annual premiums new borrowers will pay by half of a percent. This action is projected to save more than 2 million FHA homeowners an average of $900 annually and spur 250,000 new homebuyers to purchase their first home over the next three years.
The action also reflects the improved economic health of FHA's mutual mortgage insurance fund. FHA's recent annual report to Congress demonstrates the economic condition of the agency's single-family insurance fund continues to improve, adding $21 billion in value over the past two years.
"This action will make homeownership more affordable for over 2 million Americans in the next three years," Castro said. "Since 2009, the Obama administration has taken bold steps to reduce risks in the mortgage market and to protect consumers. These efforts have made it possible to take this prudent measure while also ensuring FHA remains on a positive financial trajectory. By bringing our premiums down, we're helping folks lift themselves up so they can open new doors of opportunity and strengthen their financial futures."
In the wake of the nation's housing crisis, FHA increased its premium prices to stabilize the health of its MMI fund. In addition, the Obama administration took dramatic steps to safeguard consumers in the mortgage market to ensure responsible borrowers continued to have access to mortgage capital as many private lending sources tightened their lending standards.
The reduction will significantly expand access to mortgage credit for these families and is expected to lower the cost of housing for the approximately 800,000 households who use FHA annually.
FHA's new annual premium prices are expected to take effect toward the end of the month. FHA will publish a mortgagee letter detailing its new pricing structure shortly.