Will the recent FHA Mortgage Insurance Reduction be Trumped?

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HUD Secretary Castro proudly announced the reduction of FHA’s annual mortgage insurance premium just a week ago as his parting gift of tenure before having to leave his position. There has been a lot of discussion on if this will be an action that Trump’s new administration will roll back.

This morning, the Mortgage Bankers Association has warned that there is a “strong chance” that once in office, this may be rolled back effective immediately. Based on last week’s Mortgagee Letter from HUD, the annual mortgage insurance for FHA loans closing on or after January 27, 2017 will have annual mortgage insurance reduced by 25 basis points. The Mortgagee Letter issued one week ago providing this change to reduced mortgage insurance based on closings taking place less than three weeks later was enough to cause a hiccup for mortgage lenders and consumers. Honestly, I wish that Castro would have made this move prior to January so that this wouldn’t seem so political.  Now add the incoming Trump administration, who were apparently were not consulted of reduction just days before Trump takes office….I’m not a politician and, for the record, I’m having a hard time identifying with either D or R party these days…but it seems like it was at the least, inconsiderate to not consult the incoming party (assuming the news or fake news I read is somewhat accurate).

This evening, I’m reading from Housing Wire that it looks like the FHA mortgage insurance reduction has high odds of being rolled back or delayed.

As a Loan Officer who helps home buyers wanting an FHA mortgage and home owners wanting to refi – this is all putting consumers (and lenders) in a terrible position. It is an awkward conversation with a client buying a home to say “yes, I quoted you this payment with mortgage insurance based on your purchase closing after January – however, the new administration may decide to reverse this”.

Add to that all the disclosures lenders have to produce and thus, consumers have to endure.  As a lender, we have to proceed with the current mortgagee letter from FHA with the reduced mortgage insurance and should this be rolled back, we have to redisclose based on a government action — most likely delaying transactions with the mandatory wait periods.

Bottom line – it’s looking like a mess. At first, I thought that there was no way that Ben Carson or Trump would roll this back – it was just puffery and they would simmer down once in office. I can say that I’m now honestly concerned that they may proceed with this roll back and I’ve advised my FHA clients accordingly.

If you are an FHA buyer or doing an FHA refinance, you need to be in close contact with your lender and make sure you qualify with the higher “current” FHA premiums instead of what has been issued for closings on or after January 27.

If you are a listing or selling agent with an FHA approved buyer with a transaction closing after Friday, you may want to contact the lender to make sure the buyer qualifies at the higher annual mortgage insurance premium.

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