USMI Statement on Requests to Reduce FHA Mortgage Insurance Premiums
WASHINGTON — Over the last couple of weeks, there have been requests, including from some trade organizations and Democratic members of Congress for the U.S. Department of Housing and Urban Development (HUD) Secretary Ben Carson to reinstate a cut scheduled under the Obama Administration to the Federal Housing Administration (FHA) mortgage insurance premiums (MIP). The following statement can be attributed to Lindsey Johnson, USMI President and Executive Director:
“Helping creditworthy homebuyers qualify for mortgage financing despite a low-down payment is good policy. It is precisely why conventional loans with private mortgage insurance (MI) and the government-backed FHA loans exist. However, reducing FHA premiums is neither necessary nor prudent at this time. Credit remains available for these borrowers in the conventional market, where the risk is backed by private capital, such as MI. A FHA premium reduction will only draw borrowers served in this market over to the FHA, where the risk is 100 percent backed by the government and taxpayers.
“The FHA has and continues to serve an important role in the housing finance system. While the financial health of the FHA has improved since the financial crisis, it is by no means in a position to have the fees it charges for the insurance it provides reduced. Taxpayers are currently exposed to more than $1 trillion in mortgage risk outstanding at the FHA. This would only increase if FHA premiums were reduced.
“Rather than reduce premiums, the FHA should continue to make the needed improvements to its financial health. Policymakers should also work to establish a more coordinated and transparent housing policy that will promote increased access to low down payment lending while at the same time decreasing the federal government’s role in housing, such as reducing or eliminating the GSEs’ loan level price adjustments (LLPAs)—a more effective and prudent means for improving access to mortgage finance credit. Further, we strongly urge against any change to FHA’s life of loan coverage. Unlike private MI, which is cancellable, FHA’s insurance coverage does not go away—thus, taxpayers are on the hook for FHA-insured mortgages for the entire life of the loan.
“Private capital can and should play a leading role in insuring low down payment mortgages so the government and taxpayers are protected from mortgage credit risk. Past FHA commissioners strongly agree with this sentiment. For over 60 years, private MI has been a time-tested and reliable way for Americans to become homeowners sooner—with more than 25 million borrowers helped to date. USMI looks forward to working with all interested parties in Congress and the housing market to ensure we create a housing finance system that protects taxpayers while also promoting homeownership throughout the country.”
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.