Feb. 22 (UPI) — The U.S. Department of Housing and Urban Development Wednesday announced cuts to its annual mortgage insurance premiums, a move forecast to save the average family around $800 a year.
Vice President Kamala Harris is traveling to Bowie State University in Maryland, where she is expected to comment on the announcement Wednesday afternoon. She is expected to address housing affordability among low- to medium-income Americans.
The premium for an FHA-insured mortgage is being cut 30 percentage points, from the current 0.85%, to 0.55% for most homebuyers. Buyers pay the premium on top of interest rates and monthly principal amounts, in order to obtain the insured mortgages.
The reduction in premiums comes through the department’s Federal Housing Administration and is expected to translate to savings above and beyond the $800 amount for those with higher loan amounts.
More than an estimated 850,000 homebuyers and homeowners are expected to benefit this year from the policy change.
“In total, this action will help low- and moderate-income Americans save an estimated $600 million in the next year alone, and many billions over the next decade,” HUD said in a statement.
Using 2022 fourth quarter median home price of $467,700, the average individual homebuyer would save more than $1,400 a year in fees. FHA-insured mortgages accounted for 7.5% of home sales in the third quarter of last year, according to the White House.
Last month, mortgage broker Fannie Mae said it expects affordability to remain the top challenge for potential homebuyers through 2023.
“For this country to truly succeed, all Americans must have access to opportunity. That means expanding access to wealth-building and home ownership,” HUD Secretary Marcia Fudge said in a statement.
“Today, we are building on the steps we’ve taken to make homeownership more affordable, and HUD is acting to ensure people feel comfortable purchasing a home as they build toward their future. As we reduce housing costs for people with FHA mortgages, we continue our work to address longstanding disparities in homeownership.”
Fudge will join Harris Wednesday afternoon at Bowie State, part of the University System of Maryland and Maryland’s oldest historically black university. Remarks are expected to start at 3:40 p.m. EST.
Reducing the interest rates is possible because the FHA has accumulated more than the necessary reserves to digest the cuts.
“Over the last several years, FHA’s mortgage insurance fund has accumulated reserves at a level that is more than five times the required threshold set by Congress,” the White House said in a statement.
“This was made possible by HUD’s responsible and responsive management policies, home price appreciation, and significant refinance volume which together have led to an accumulation of substantial reserves.”