Removing Barriers Blog

Trump Administration Rescinds Order to Cut FHA Insurance Premiums
Posted January 23, 2017 by CUNA Advocacy

In one of the new Administration's first actions, the Department of Housing and Urban Development (HUD) announced Saturday that a cut in Federal Housing Administration (FHA) mortgage insurance premiums scheduled to go into effect January 27 would not happen as planned. FHA assesses these premiums to insure these government-backed mortgages, particularly for first time and low income homebuyers, against default. 

Whereas the FHA had argued the premium cuts, which could affect between 750,000 and 850,000 borrowers, according to estimates by the National Association of Realtors, were warranted given the strengthened capital position of the FHA insurance fund, there is concern in some circles that the FHA's share of new mortgages has grown too large, potentially crowding out private investment. HUD's move to rescind the cuts could be seen as an attempt to help rebalance the market.

As with the guarantee or "G" fees charged by government sponsored enterprises Fannie and Freddie to protect investors against default, CUNA has long argued that FHA insurance premiums should be set at a level that naturally reflects the aggregate risk to government backers of mortgages. We will continue to monitor the health of these entities and the broader mortgage market, and advocate for an appropriate balance between protecting taxpayers and ensuring adequate and equitable access to mortgage credit for credit union members.