Biden administration announces significant reduction in MIPs, housing groups react
The Federal Housing Administration (FHA) has announced a reduction in its annual mortgage insurance premium (MIP) fees by 30 basis points as part of its ongoing effort to address the nation’s housing affordability challenges.
The cut will lower MIPs – an annual fee charged to new homebuyers with FHA mortgages – from 0.85% to 0.55%. This change will take effect on March 20 and is expected to save FHA loan borrowers, primarily low- and middle-income and first-time buyers, an average of $800 in their first year of homeownership.
“As we reduce housing costs for people with FHA mortgages, we continue our work to address longstanding disparities in homeownership,” said Housing and Urban Development secretary Marcia Fudge.
National Association of Realtors president Kenny Parcell commented on the long-anticipated reduction: “FHA’s announcement strikes an appropriate balance between assisting homeowners and ensuring the capital reserve ratio and insurance fund remain strong. NAR has continuously advocated for responsibly reducing mortgage insurance premiums to help qualified home buyers struggling with affordability in the current environment, and we applaud the Administration for this action.
“This reduction will help alleviate some of the financial stress those potential buyers encounter when purchasing a home and allow more people across the country to achieve the American Dream of homeownership.”
Alicia Huey, chairman of the National Association of Home Builders (NAHB), also commended the FHA and HUD’s efforts to make home loans more affordable.
“With mortgage rates doubling over the past year, this action will boost the housing recovery and reduce the cost of housing for creditworthy borrowers, particularly first-time home buyers,” Huey said. “While the White House reports this new premium structure will save home buyers and homeowners an average of $800 per year, it will also help to ease tighter credit conditions in the mortgage market that are harming affordability.”
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