Homeownership is at the lowest level in 50 years, and one of the primary reasons is that younger Americans are not buying homes at nearly their normal pace. They are struggling both to afford a home and to qualify for a mortgage.
Younger, first-time buyers usually turn to FHA loans. These are low down payment mortgages insured by the federal government. Borrowers can put just 3.5 percent down, but they do have to pay insurance on the loans. That insurance was about to get cheaper because one of the final acts of the Obama administration was to lower the FHA annual premium. But the Trump administration reversed that decision on its first day.
The administration said only that, "more analysis and research are deemed necessary to assess future adjustments."
That came in a letter signed by General Deputy Assistant Secretary for Housing Genger Charles. HUD Secretary nominee Ben Carson addressed the last-minute move by the outgoing administration in hearings last week. "I, too, was surprised to see something of this nature done on the way out the door. Certainly if confirmed, I'm going to work with the FHA administrator and other experts to really examine that policy," Carson said in response to a question from Sen. Patrick Toomey, R-Pa.
When the cut was announced on Jan. 9, 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."
The cut in the premium, a quarter of a percentage point, would have saved borrowers on their monthly payments, but it also would have allowed more borrowers to qualify for FHA loans — up to 40,000 more, according to the National Association of Realtors. That is because lenders today follow very strict limitations on how much debt a borrower can have compared with his or her income. The insurance premium is part of that debt.