The Department of Housing and Urban Development (HUD) will not make changes to the Federal Housing Administration’s (FHA) Single-Family Mutual Mortgage Insurance Fund (MMIF), HUD Secretary Marcia Fudge announced Tuesday. “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. We will continue to rigorously evaluate our strategy and work transparently with Congress,” Fudge said.
Some advocates in the housing industry have pushed for a 25-basis point cut in the price of the premiums. Other industry leaders noted that such a change would have had unpredictable effects on the housing market and thus would have been inappropriate at a time of economic uncertainty. In a statement, Mortgage Bankers Association President and CEO Bob Broeksmit commended the decision stating, “…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.”
Claims on FHA-insured home mortgages are paid out of the MMIF, which is funded through fees paid by borrowers (called premiums). High MIPs result in homebuyers paying higher rates. But if the MIP is too low, then the MMIF is at risk of dropping below the 2% minimum, leading to a taxpayer bailout. The current MIP is at or near historic lows. NHC has supported holding back on changes to the MIP until pandemic related losses are more clear. “Getting the MIP right is a decision that should prioritize the long term benefits for first time home buyers and the safety and soundness of the MMIF. These two issues are not mutually exclusive,” NHC communicated to HUD in January.