HUD Suspends FHA Insurance Premium Reduction

As widely expected, within minutes of President Trump taking office on Friday, HUD announced that it suspended indefinitely an earlier Mortgagee Letter reducing FHA Mortgage Insurance Program fees by 25 basis points.

Mortagee Letter 2017-07 ( states: “This Mortgagee Letter (ML) communicates that Mortgagee Letter 2017-01, reducing Mortgage Insurance Premiums for loans with Closing/Disbursement date on or after January 27, 2017, has been suspended indefinitely. FHA will issue a subsequent Mortgagee Letter at a later date should this policy change. This ML is effective immediately.”

Mortgage Bankers Association President and CEO David Stevens, CMB, issued a statement:

“We recognize the Administration’s need to examine the overall health of the insurance program and weigh that against the benefits of lowering mortgage insurance premiums,” Stevens said. “Given that lenders have already started preparing for the MIP decrease, it is important that any new policy be implemented in a way that minimizes disruption for borrowers and lenders. MBA looks forward to working with the new Administration to ensure the long term stability of the FHA program, creating an environment that provides clarity in regulations for lenders while at the same time promoting access to credit and protecting consumers.”

HUD had issued the MIP premium reduction on Jan. 9 ( Then-HUD Secretary Julián Castro estimated the premium reductions could save new FHA-insured homeowners an average of $500. The reduction was supposed to go into effect Jan. 27.

The reduction came after four consecutive years of improved economic health of FHA’s Mutual Mortgage Insurance Fund, which gained $44 billion in value since 2012. Last year, an independent actuarial analysis found the MMI Fund capital ratio grew by $3.8 billion and now stands at 2.32 percent of all insurance in force, above the congressionally mandated 2 percent threshold.

In anticipation of the suspension, MBA last week issued a Bulletin ( 2017 MBA Bulletin on MIP Delay.pdf) recommending that MBA members consult with their counsel and investors for guidance on how to proceed.