In recent years, the health of the Federal Housing Administration’s flagship insurance fund has continually improved, leading to speculation that the FHA could reduce its mortgage insurance premiums to ease the costs for borrowers with an FHA loan.
But it appears no such cut is coming…at least not any time soon.
Department of Housing and Urban Development Secretary Marcia Fudge said recently that the FHA is not planning to make any reductions to FHA mortgage insurance premiums, which are the fees that borrowers pay both up front and each month to have their mortgage insured by the FHA.
Fudge made the declaration in conjunction with HUD submitting its quarterly report to Congress on the health of the FHA insurance program.
According to HUD, the FHA’s Mutual Mortgage Insurance Fund is still in good shape even after a year that saw “increased levels of seriously delinquent loans and a heightened level of loans in forbearance” due to the pandemic.
Per details from HUD, the MMI Fund is still “well above” the Congressionally mandated minimum threshold of 2% and “has remained resilient despite the financial challenges faced by homeowners with FHA-insured mortgages in 2020.”
Despite the fact that the MMI Fund remains above its required level, Fudge said the FHA will not be cutting mortgage insurance premiums.
In a statement, Fudge said that HUD is monitoring the performance of the mortgages in its portfolio, especially the mortgages of homeowners who were affected by the pandemic. But Fudge said that now is not the time to make a change to FHA premiums.
“Given the current FHA delinquency crisis and our duty to manage risks and the overall health of the fund, we have no near-term plans to change FHA’s mortgage insurance premium pricing,” Fudge said.
The news was welcomed by the Mortgage Bankers Association, which said it would like to see lower mortgage costs for borrowers but understands why the FHA is not ready to make a cut now.
“MBA commends Secretary Fudge for maintaining FHA’s current mortgage insurance premium pricing until we have a clearer picture of the long-term impact of the pandemic on FHA borrowers and the insurance fund,” MBA President and CEO Bob Broeksmit said in a statement.
“While it is desirable to have lower mortgage financing costs, particularly as rates rise and home prices continue to increase, we agree with HUD that we need more data about how the more than 1 million FHA loans that are delinquent perform as they exit COVID-19-related forbearance,” Broeksmit continued. “We look forward to continuing to work with Secretary Fudge on ways to protect FHA borrowers and ensure the overall stability of the FHA program.”