Things are changing in Washington DC with President Donald Trump being sworn into office last Friday. One of the first executive actions taken by the new President was in regards to Federal Housing Administration (FHA) loan insurance premiums.
The scheduled rate cut were set to take effect on January 27 and would have amounted to reducing FHA-loan insurance fees (MIP fees) from .85% of loan amount to .60% of loan amount. Democratic Senate Minority Leader Chuck Schumer took to Twitter in criticism of the policy, saying it would have saved home buyers as much as $500 per year.
So why did the Trump Administration take action? The argument is based around concerned related to events that happened with the real estate collapse of the mid-2000s. FHA loans already allow for small down payments (as low as 3.5%) and credit scores as low as 580; meaning that FHA borrowers are more likely to have less stable financial history. The main concern is that these riskier borrowers are more likely to default on their loans and that cost would fall back on the FHA (i.e. taxpayers).
What does this mean for you? Well, if you are currently paying these monthly fees on your loan, your rate will remain the same. Since the cut has not gone into effect, your payments will not change, for the time being. President Trump has selected Ben Carson as his Secretary of Housing and Urban Development, but Carson has yet to be confirmed for the position. Carson did signal, however, that when he assumes his new role, they will reevaluate the policy.
This action is not likely to have much impact on the housing market, but it is interesting to note that the real estate industry has been in the spotlight, day one of the new Administration.