With housing affordability at an all-time low and accelerating consumer prices disproportionately affecting lower- and middle-income families, the Mortgage Bankers Association this week called on the White House and the Federal Housing Administration to reduce annual mortgage insurance premiums.
In a letter addressed to the National Economic Council, the mortgage trade group said the combination of high mortgage rates — which reached 6.28% on Tuesday — and home prices north of $400,000, has “put severe stress on prospective LMI and first-time homebuyers.” According to MBA data, the national median mortgage payment was $1,844 in July, up by more than $460 in just the first seven months of this year.
Industry groups have been deeply frustrated at the FHA’s decision to withhold a mortgage insurance premium cut, which HUD officials in July attributed to “budgetary implications, tradeoffs within appropriations process and the FHA’s role in the broader housing system.”
In its letter on Tuesday, the MBA noted that the FHA’s Mutual Mortgage Insurance Fund (MMIF) capital reserve ratio is four times the statutory minimum reserve ratio.
“Today, the MMIF capital reserve ratio stands at more than 8%, four times the statutory minimum reserve ratio,” the MBA said, noting that the FHA’s serious delinquency rate returned to pre-pandemic lows of 4.64% at the end of the second quarter.
“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 MBA wrote in its letter.
“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. As economic conditions continue to worsen, reducing the MIP also allows borrowers the flexibility to spend on necessary items like food, gas, education, and other monthly bills.”
Lowering MI premiums would help FHA products remain competitive in the current market, the MBA said in its letter.
The MBA is hardly the only industry trade group beating the drum to reduce mortgage insurance premiums. The Community Mortgage Lenders Association, which represents mid-size and small lenders, in May called the lack of action regarding MIP cuts “especially bewildering.” The trade group likened keeping premiums at current levels to “price-redlining.”
Only by cutting premiums will the Biden administration be able to carry out its objectives of improving racial equity and increasing homeownership, the CHLA said in its May letter.
Julia Gordon, the FHA commissioner, testified to Congress as a private citizen calling for cuts to mortgage insurance premiums, but has not done so as FHA commissioner.
The last premium reduction took place in 2015, when the Obama administration slashed the premiums from 1.35% to .85%.