Lower FHA Mortgage Insurance Premiums Benefit Borrowers


WASHINGTON (January 9, 2017) – As the nation’s housing market continues to improve, U.S. Housing and Urban Development Secretary Julián Castro today announced the Federal Housing Administration (FHA) will reduce the annual premiums most borrowers will pay by a quarter of a percent.  FHA’s new premium rates are projected to save new FHA-insured homeowners an average of $500 this year.

National Association of Realtors (NAR) President William Brown says that this reduction is “a fresh start.” Brown added that “FHA mortgage products exist to serve an important mission: providing homeownership opportunities to credit-worthy borrowers who are overlooked by conventional lenders.”

FHA is reducing its annual mortgage insurance premium (MIP) by 25 basis points for most new mortgages with a closing/disbursement date on or after January 27, 2017.

Today’s action reflects the fourth straight year of improved economic health of FHA’s Mutual Mortgage Insurance Fund (MMIF), which gained $44 billion in value since 2012.  Last year alone, an independent actuarial analysis found the MMI Fund’s capital ratio grew by $3.8 billion and now stands at 2.32 percent of all insurance in force—the second consecutive year since 2008 that FHA’s reserve ratio exceeded the statutorily required two percent threshold.

Secretary Castro said FHA’s action reflects today’s risk environment and comes at the right time for consumers who are facing higher credit costs as mortgage interest rates are increasing.

“Ed Golding, Principal Deputy Assistant Secretary for HUD’s Office of Housing added, “We’ve carefully weighed the risks associated with lower premiums with our historic mission to provide safe and sustainable mortgage financing to responsible homebuyers.  Homeownership is the way most middle class Americans build wealth and achieve financial security for themselves and their families.  This conservative reduction in our premium rates is an appropriate measure to support them on their path to the American dream.”

NAR President Brown commented that “dropping mortgage insurance premiums will mean a lot more responsible borrowers will suddenly be eligible to purchase homes through FHA — and that means more money in the fund to protect taxpayers.”

The NAR encourages the leadership at FHA and HUD to look at eliminating the requirement that requires FHA borrowers to maintain mortgage insurance for the life of the loan — regardless of their equity in the house. On the other hand, borrowers with traditional mortgages can–in most cases– eliminate the mortgage insurance requirement once they have reached a 20 percent equity stake in the property.


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