The Mortgage Bankers Association (MBA) joined three other housing groups in urging the Biden administration to lower annual mortgage insurance premiums (MIPs) on loans backed by the Federal Housing Administration (FHA).
In a letter jointly signed by the MBA, the National Association of Realtors, the National Association of Home Builders and the Manufactured Housing Institute, the groups asserted that “an actuarially prudent reduction of the FHA’s annual MIP” would help rein in affordability challenges for homebuyers amid still-high home prices and the current rising mortgage rate environment. Specifically, the groups noted that the U.S. median monthly mortgage payment was $1,844 in July, an increase of more than $460 since the start of 2022.
Officials within the U.S. Department of Housing and Urban Development cited budgetary implications earlier in the summer in opting not to reduce MIPs. But the MBA and its allies pointed out that the FHA’s Mutual Mortgage Insurance Fund, which the agency uses to cover lenders against losses caused by borrower defaults, is sufficiently cushioned at the moment.
“We recognize that any reduction of the MIP must be evaluated against the actuarial condition of the FHA’s Mutual Mortgage Insurance Fund (MMIF),” the joint letter stated. “Today, the MMIF capital reserve ratio stands at more than 8%, four times the statutory minimum reserve ratio. Just as important, FHA loan performance has recovered from COVID-related forbearance – FHA’s serious-delinquency rate in the second quarter of 2022 at 4.64% has returned to pre-pandemic lows and stands at the lowest level since the first quarter of 2020.”
The organizations specifically brought up low- to moderate-income and first-time homebuyers, insisting that action is “critical” to ensure that they aren’t “left behind” during an affordability crunch. Additionally, with inflation still rampant, slashing MIPs would free up funds for borrowers to spend on necessities such as food, gas and education.
“The Department of Housing and Urban Development (HUD) was created with the goal of providing access to housing and homeownership, and we commend the Biden administration for putting an emphasis on housing issues,” the groups wrote. “To remain competitive in the current market, we also recommend the FHA update their origination and servicing processes to make buyers presenting these offers more competitive. … We strongly encourage the administration to immediately lower the MIP so low- to moderate-income and first-time homebuyers can participate in the American dream of homeownership.”