Castro's parting gift: one last cut to FHA premiums
WASHINGTON — The Federal Housing Administration is cutting its annual mortgage insurance premium by 25 basis points, to 60 basis points, starting Jan. 27, the agency said Monday.
The move comes in the final days of the Obama administration and it gives Department of Housing and Urban Development Secretary Julian Castro an opportunity to tout the financial recovery the FHA's mortgage insurance fund has made during his term.
"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," Castro said. "This is a fiscally responsible measure to price our mortgage insurance in a way that protects our insurance fund while preserving the dream of homeownership for credit-qualified borrowers."
The annual fee was as high as 135 basis points when the FHA was dealing with high delinquency rates and foreclosures.
After cutting the annual fee in early 2015, the FHA experienced a surge in mortgage applications that helped the fund recapitalize and exceed its statutory 2% minimum capital requirement.
In addition to the annual fee, the FHA also charges a 175-basis-point upfront fee, which was as high as 225 basis points during the housing crisis.
The move Monday may draw Republican complaints, as many GOP lawmakers have warned Castro not to lower premiums again, citing concerns about the health of the mortgage fund and the government's role in the mortgage market.
But it is certain to please mortgage lenders who have been calling on the FHA to make a cut.