As the nation's housing market continues to improve, U.S. Housing and Urban Development Secretary Julián Castro has announced that the Federal Housing Administration (FHA) will reduce the annual mortgage insurance premiums that new borrowers will pay by half of a percent.
According to FHA, this action is projected to save more than two million FHA homeowners an average of $900 annually and spur 250,000 new homebuyers to purchase their first home over the next three years.
FHA says that the decision to lower premiums also reflects the improved economic health of its Mutual Mortgage Insurance Fund (MMIF). The agency's recent annual report to Congress showed that the economic condition of the agency's single-family insurance fund continues to improve, adding $21 billion in value over the past two years.
"This action will make homeownership more affordable for over two million Americans in the next three years," said U.S. Department of Housing and Urban Development Secretary Julián Castro. "Since 2009, the Obama Administration has taken bold steps to reduce risks in the mortgage market and to protect consumers. These efforts have made it possible to take this prudent measure while also ensuring FHA remains on a positive financial trajectory. By bringing our premiums down, we're helping folks lift themselves up so they can open new doors of opportunity and strengthen their financial futures."
"In the wake of the nation's housing crisis, FHA increased its premium prices to stabilize the health of its MMI Fund. In addition, the Obama Administration took dramatic steps to safeguard consumers in the mortgage market to ensure responsible borrowers continued to have access to mortgage capital as many private lending sources tightened their lending standards," FHA said in a press release.
FHA says that the reduction in annual premiums is expected to significantly expand access to mortgage credit and lower the cost of housing for the approximately 800,000 households who use FHA annually.
FHA's new annual premium prices will take effect for all new FHA-insured mortgages endorsed toward the end of this month. FHA says that it will publish a mortgagee letter detailing its new pricing structure "shortly."