Trump Suspends Initiative to Reduce Mortgage Insurance Premiums The New Administration Reverses a Decision Made By the Obama White House

Aston, PA, USA - September 22, 2016: Republican presidential nominee Donald Trump delivers a speech at a rally in Aston, Pennsylvania. (istock)

On January 9, shortly before the end of his second and final term, President Barack Obama sent a directive to the Department of Housing and Urban Development (HUD), ordering a reduction in FHA mortgage insurance premiums by a quarter of a point, from 0.85 percent to 0.60 percent. According to Bloomberg News, the cut would have saved homeowners as much as $500 a year for someone borrowing $200,000.

“After four straight years of growth and with sufficient reserves on hand to meet future claims, it’s time for FHA to pass along some modest savings to working families,” said then- Secretary of Housing and Urban Development Julian Castro, as quoted in TheHill.com.

Republicans countered that the reduction would lower the funds to help the FHA handle mortgage defaults. Texas Republican Congressman Jeb Hensarling, who is also chair of the House Financial Services Committee, criticized the then-outgoing administration's move. "It seems the Obama administration's parting gift to hardworking taxpayers,” he said, as quoted by CNBC, “is to put them at greater risk of footing the bill for yet another bailout. Just three years ago the taxpayers had to spend $1.7 billion to bail out the FHA. Lowering premiums to below market rates now only puts the FHA in a more precarious financial condition."

A day after his inauguration, President Donald Trump sent an order to HUD suspending this reduction in mortgage insurance premiums indefinitely, with the new administration saying that "more analysis and research are deemed necessary to assess future adjustments," as reported by CNBC.

Some Clarification

Two important facts should be noted here that have not been widely addressed in the media. According to Tim Beyers, mortgage analyst with American Financing, a mortgage banking company based in Colorado, “first, this was not an executive order. It was rather a directive to a federal agency by the White House.”

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