Mortgage News March 10, 2023
The U.S. Department of Housing & Urban Development (HUD) has announced a reduction to the annual mortgage insurance premiums (annual MIP) charged to homebuyers who obtain a Federal Housing Administration (FHA) – insured mortgage. Around 850,000 borrowers are expected to benefit from this reduction, resulting in an average annual savings of $800 for these households in the upcoming year. The MIP will be reduced from 0.85% to 0.55% for most homebuyers seeking an FHA-insured mortgage, which could mean an estimated savings of $678 million for American families by the end of 2023 alone.
This action by HUD is expected to help address historic disparities in homeownership, where homebuyers of color have been underrepresented. The National Association of Realtors (NAR) has applauded this action and has continuously advocated for responsibly reducing mortgage insurance premiums to help qualified home buyers struggling with affordability in the current environment.
The reduction of 30 basis points in annual MIP will be effective for almost all Single-Family Title II forward mortgages insured by FHA. Further, the reduction applies to all eligible property types, including single-family homes, condominiums, and manufactured homes, all eligible loan-to-value ratios, and all eligible base loan amounts. The reduction in mortgage insurance premiums is anticipated to enable more households, especially first-time homebuyers and families of color who depend largely on affordable FHA-insured mortgages, to achieve the stability and wealth-building benefits of homeownership.
This action builds on a range of steps the Department has taken to make homeownership a reality for more Americans and close the racial divide in homeownership. The Mortgage Bankers Association (MBA) has also welcomed this reduction, stating that ensuring a robust FHA program that protects taxpayers and offers affordable homeownership opportunities for families in underserved communities is important. Ginnie Mae President Alanna McCargo noted that a reduced annual MIP increases affordability and provides payment savings amidst rising costs of housing and high market interest rates.
Overall, the reduction in annual MIP by HUD is expected to benefit a significant number of American families seeking homeownership, particularly those who are struggling with affordability. This reduction is also expected to help address longstanding disparities in homeownership, where homebuyers of color have been underrepresented.
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