WASHINGTON (1/8/15)--President Barack Obama has announced a plan to make homeownership more affordable by reducing Federal Housing Administration (FHA) mortgage insurance premiums and expand responsible lending to creditworthy borrowers.
The release comes as Obama is expected to address housing issues in Arizona today at Central High School in Phoenix. Bob Ramirez, chair of Mountain West Credit Union Association, has accepted an invitation to attend the meeting. Ramirez also is president/CEO of $1.3 billion-asset Vantage West CU, Tucson, Ariz.
The Credit Union National Association sent a letter Tuesday, along with a number of other housing and financial trade organizations, requesting the lower premiums. The letter was sent to U.S. Department of Housing and Urban Development Secretary Julian Castro.
"We believe it is now time for FHA to enable more households to access homeownership by reducing mortgage insurance premiums while still maintaining fiscal prudence and continuing the trajectory toward full replenishment of the fund," the letter reads.
According to a fact sheet released by the White House Wednesday, the FHA will reduce mortgage insurance premiums by 0.5%, to 0.85% from 1.35%. The White House estimates that this represents an average savings of $900 per year for new borrowers.
In addition, the lower premiums are expected to help more than 800,000 homeowners save on monthly mortgage costs and enable up to 250,000 new home buyers to purchase a home.
"The president continues to strongly support long-term housing finance reform through legislation that requires private capital to take the risks and rewards in mortgage lending while preserving broad and affordable access for all creditworthy families," reads a statement from the White House.
The new 0.85% rate is still higher than FHA's historic norms, and despite the reduction, the FHA is expected to add $7 billion to $10 billion annually to its capital reserves, as well as maintain a "positive financial trajectory" for the Mutual Mortgage Insurance Fund.
Per the White House, year-over-year home prices have risen for 32 straight months, homeowner equity is up by more than $4 trillion, the annual rate of housing starts is more than double the April 2009 low of 478,000, existing single-family home sales have increased as much as 50% from their crisis low and mortgages delinquent more than 90 days has decreased by more than 50%, the lowest level since 2008.