It’s been tough going for first-time homebuyers since the housing market collapse and the recovery that has seen home prices steadily rise and inventories tighten.
Now President Obama is set to announce a cut in Federal Housing Administration mortgage-insurance premiums as the agency’s insurance fund has reached a positive level for the first time in three years, according to media reports.
Bloomberg reported today that Obama will make the announcement tomorrow during a speech in Phoenix. The annual fees the agency charges to guarantee mortgages will be cut by 0.5 percentage points, the report says.
Last month, a group of 18 senators — all Democrats and an independent — sent a letter to Department of Housing and Urban Development Secretary Julián Castro urging him to lower FHA mortgage costs, typically charged to borrowers who bought homes with low down payments. Many of them are first-time home buyers, a category of borrowers increasingly forced out of the housing market in recent years.
The FHA’s mortgage insurance business surged significantly during the Great Recession to cover losses caused by defaults on mortgages. The agency is supposed to fund itself from premiums it charges homeowners, and it raised premiums in early 2013 to shore up its fund. The agency doesn’t issue mortgages, but insures lenders against losses on loans with down payments of as little as 3.5 percent.
“We congratulate you on the vast improvement in the FHA’s financial position and urge you to use this opportunity to ensure that premiums are set at a level that balances both sustainability and affordability,” wrote the senators in the letter.
The FHA’s insurance fund, which received its first bailout ever in a $1.7 billion draw from the Treasury Department last year, reported its first positive balance in three years for fiscal year 2014.