The debate continues over whether FHA should reduce their required annual or up-front mortgage insurance premiums.
A prior cut was canceled by the Trump Administration. Now with markets improving, the new HUD Secretary, Dr. Ben Carson, says FHA may consider a cut. But, only if in the best interest of the FHA insurance fund and consumers.
FHA delinquencies are down and the insurance reserves are up. Good news for FHA, lenders, and home buyers FHA is the primary source of home financing for most first-time and low to moderate income home buyers.
A premium cut would make financing and the home purchase, more affordable. Problem is that there is a shortage of affordable housing
Although the cut could be good for some; is the timing right or could it hurt the housing recovery by potentially again weakening the FHA insurance fund while further depleting available affordable housing.
The fund could be weakened by expanding financing to more; while collecting less to cover potential defaults. If the existing loans continue to perform well and the new loans follow suit, we’re good. Otherwise, we could be creating new problems. Problems we’ve seen before and don’t want to see again.
If we decide to go that route, it’s important that we also continue to originate the quality, compliant loans like those that have been originated over the past few years.
If FHA cuts the insurance rate and/or loosen credit guidelines, lenders need to stay diligent and continue to originate good loans that will perform.
So what’s your take? Tell me if you think it is time to cut the FHA Premiums or hold the line?
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