"After four straight years of growth and with sufficient reserves on hand to meet future claims, it's time for FHA to pass along some modest savings to working families," said Housing and Urban Development Secretary Julian Castro. "This is a fiscally responsible measure to price our mortgage insurance in a way that protects our insurance fund while preserving the dream of homeownership for credit-qualified borrowers."
Industry leaders applauded the move, but suggest more needs to be done to juice a housing market that is becoming ever more expensive. First-time homebuyers in particular are struggling to enter today's market, as higher home prices and higher mortgage rates hit affordability. Underwriting, in particular, remains tight, and credit scores for FHA are still higher than they have been historically.
"Reducing the cost of FHA loans benefits borrowers, but other changes to reduce uncertainty for lenders would be required to truly invigorate the FHA program," David Stevens, president and CEO of the Mortgage Bankers Association, said in a statement. "MBA looks forward to continuing to work with all stakeholders, including the new Administration, to ensure the safety and soundness of the FHA program."
And therein lies the biggest question: Will the Trump administration welcome much-needed housing stimulus or balk at the prospect of more government risk? The Trump transition team has been getting "good briefings" from HUD officials, according to Castro, who says the transition is, "proceeding well." The transition team, however, was not apprised of the premium reduction until Monday because it could move stock prices, especially of mortgage insurers.
"I have no reason to believe that this will be scaled back," said Castro. "The fund is in a much stronger position than it's been in years." The Trump transition team did not immediately respond to a request for comment.
And not everyone in D.C. was applauding the move. Republican Rep. Jeb Hensarling, chair of the House Financial Services Committee with oversight over the FHA, said: "It seems the Obama administration's parting gift to hardworking taxpayers is to put them at greater risk of footing the bill for yet another bailout. Just three years ago the taxpayers had to spend $1.7 billion to bail out the FHA. Lowering premiums to below market rates now only puts the FHA in a more precarious financial condition. Playing politics with the FHA through cynical, surprise 11th hour rule changes is irresponsible and endangers the integrity and success of the FHA."