As Donald Trump prepares to be sworn in next week, officials under the Obama administration are setting their respective departmental affairs in order. Poised for a transition, Secretary Julián Castro has imparted one final gift before making way for his successor.
The Federal Housing Administration (FHA) has established programs aimed at helping borrowers with problematic or limited
credit attain homeownership. The U.S. Department of Housing and Urban Development announced that the FHA is lowering its annual mortgage insurance premiums by 25 basis points, bringing down MIP from 0.85 percent of the value of the mortgage to 0.60 percent. The move appears to make much of the financial recovery the agency’s fund has been making. Additionally, the FHA charges an upfront fee at 175 basis points.
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MIP was as high as 135 points during the housing crisis, while upfront fees rose to 225 basis points. A rate cut in early 2015 brought about a surge in mortgage applications. This aided the FHA’s fund recapitalization efforts, enabling it to exceed the statutory minimum capital requirement at two percent.
While lower MIP rates are sure to entice more people to take out mortgages, it isn’t likely to sit well with Republicans worrying about the health of the FHA’s mortgage fund.
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