Statement: HUD’s Decision to Reduce Annual Mortgage Insurance Premiums on FHA-Insured Loans
WASHINGTON—Seth Appleton, President of U.S. Mortgage Insurers (USMI), released the following statement on the U.S. Department of Housing and Urban Development’s (HUD) announcement to reduce the annual mortgage insurance premiums (MIP) on loans backed by the Federal Housing Administration (FHA) by 30 basis points:
“USMI and its member companies are supportive of the Biden Administration’s goals to remove barriers to homeownership, increase affordability and equity in the housing finance system, and promote sustainable homeownership. Our members also support the important role the FHA plays in promoting access to homeownership, and its historical role as a source of countercyclical support to the market in times of stress. The decision to reduce annual premiums on FHA-insured mortgages is well-intended but could result in unintended consequences for both the FHA and the borrowers it seeks to serve. For borrowers, FHA’s pricing action may make homebuying more challenging by driving up home prices even more and impairing the ability of low- and moderate-income, first-time, and minority borrowers to access homeownership. For the FHA, reduced premiums decrease its fiscal resiliency in an environment of economic uncertainty and volatile interest rates.
“FHA’s pricing policies should be actuarially sound and promote prudent long-term risk management that allows it to weather all economic scenarios in order to support future borrowers. Given the volatility in the housing market, the FHA must be prepared for the risks associated with an increase in defaults and depreciation of home values while retaining the capacity to play its important countercyclical role. It is also important to ensure the taxpayer-backed FHA market operates in a consistent and coordinated manner with the conventional market, which provides access to affordable homeownership with private capital that protects taxpayers from undue credit risk.”
Private mortgage insurance has enabled more than 37 million people to access affordable and sustainable low down payment mortgages since 1957 and plays a complementary role to FHA in the housing finance system. The industry is committed to ensuring that homebuyers across the country have access to affordable and sustainable mortgage finance to achieve the American dream of homeownership.
U.S. Mortgage Insurers (USMI) is dedicated to a housing finance system backed by private capital that enables access to housing finance for borrowers while protecting taxpayers. Mortgage insurance offers an effective way to make mortgage credit available to more people. USMI is ready to help build the future of homeownership. Learn more at www.usmi.org.