Mortgage bankers petition White House for an FHA premium cut

A quartet of housing industry trade groups have reached out to the National Economic Council, incalling on the White House advisory panel to support a reduction in the Federal Housing Administration annual mortgage insurance premium.

The letter to NEC Director Brian Deese was signed by the Mortgage Bankers Association, the National Association of Realtors, the National Association of Home Builders and the Manufactured Housing Institute.

“Against the backdrop of robust FHA capital reserves and rapidly deteriorating affordability, it is critical for the Administration to ensure low to moderate- income and first-time homebuyers are not left behind,” the letter said. “Lowering the MIP — with a focus on FHA’s recurring ‘annual’ premium — increases homebuyers’ purchasing power by reducing monthly payments and directly putting money into their pockets every month, giving them the opportunity to become homeowners and build generational wealth.”

Housing advocates and observers have long-expected an MIP cut from the Biden Administration. But the Community Mortgage Lenders of America expressed frustration as a result of the government’s inaction this past July; that position was echoed by others, including the CMLA’s eventual merger partner, the Community Home Lenders Association.

Whether it will be more effective to reach out to the White House directly, versus past efforts aimed at the Department of Housing and Urban Development and its Secretary Marcia Fudge, is an open question.

In response to the CMLA comments in July, HUD reiterated that it’s taking a prudent and judicious approach to pricing the government mortgage insurance program, as it had said previously.

“This includes consideration of a range of factors, including but not limited to things like current housing market and economic conditions, mortgage affordability and the interest rate environment, budgetary implications and any trade offs within the appropriations process, and FHA’s role within the broader housing finance system,” a spokesperson said in a statement. “These factors exist within dynamic environments and a great deal has changed over the past year.”

But the letter from the trade groups argued, much like the CMLA did, that the Mutual Mortgage Insurance Fund actuarial strength — the key metric the Federal Government needs to consider for a premium reduction — is strong at this time.

“Today, the MMIF capital reserve ratio stands at more than 8%, four times the statutory minimum reserve ratio,” the letter noted. “Just as important, FHA loan performance has recovered from COVID-related forbearance — FHA’s serious delinquency rate in the second quarter of 2022 at 4.64% has returned to pre-pandemic lows and stands at the lowest level since the first quarter of 2020.”

The letter did not spell out how large the cut should be. The market has been expecting a 25-basis point reduction, based on what the Obama administration attempted as it exited office. But some are advocating for a 30-bp cut, which would bring the MIP back to the 55 bp level it was at prior to the housing crisis.

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