White House Announces Reduction in Mortgage Insurance Premiums, Saving Homebuyers and Owners an Average of $800 per Year
The Biden Administration has announced that it will reduce the annual mortgage insurance premiums charged on loans via the Federal Housing Administration (FHA) by 30 basis points. This reduction is expected to save homebuyers and owners an average of $800 per year, making homeownership more attainable for many Americans.
The announcement was made by Vice President Kamala Harris and Department of Housing and Urban Development (HUD) Secretary Marcia Fudge during a news conference in Bowie, Md. The reduction, which will take effect on March 20, will lower the annual mortgage insurance premium from 0.85% to 0.55% for most new borrowers.
The mortgage insurance premium is a monthly fee that homeowners with FHA-insured mortgages pay to insure their mortgages. The fee is paid on top of the monthly principal and interest payments. The premium reduction is expected to save an estimated 850,000 homebuyers and homeowners in 2023, and will be reflected in the President’s Fiscal Year 2024 Budget.
The FHA-insured mortgages, which accounted for 7.5% of home sales in the third quarter of 2022, are targeted at homebuyers who might not otherwise be able to achieve homeownership. More than 80% of FHA borrowers are first-time homebuyers, and over 25% are homebuyers of color.
The announcement is an important step in making homeownership more attainable for Americans, particularly first-generation homebuyers and first-time homebuyers of color who are less likely to have sufficient resources for a sizeable down payment due to a longstanding gap in intergenerational wealth transfers.
Mortgage Bankers Association President and CEO Bob Broeksmit praised the announcement, calling it “a move we have strongly encouraged since 2021.” He added that “the lower premiums will expand homeownership opportunities by lowering mortgage payments for qualified FHA borrowers, providing critical relief from the steep rise in mortgage rates and home prices just in time for the spring buying season. This will especially help minority homebuyers and low- and moderate-income households who are predominantly served by FHA loans.”
At Ratified Title Group, we believe that homeownership should be attainable for all Americans. This reduction in mortgage insurance premiums is a positive step towards achieving that goal. We look forward to seeing more policies that have the greatest impact on borrower affordability and sustainability.