Washington, D.C. — Tomorrow in Phoenix, President Barack Obama will discuss a comprehensive approach to strengthening the housing market, including an announcement that the Federal Housing Administration, or FHA, will reduce its annual mortgage insurance premium by 0.5 percent. According to FHA data analysis, this reduction will save the average FHA borrower $900 annually, and will make homeownership affordable for an additional 250,000 households while still enabling FHA to build its capital reserves at a rate of $7 billion to $10 billion per year. Julia Gordon, Director of Housing Finance and Policy at the Center for American Progress, released the following statement:
Affordable housing—both homeownership and rental housing—constitutes a basic building block of family economic security. I commend President Obama for prioritizing this critical issue as we enter 2015.
Until now, FHA has been charging families far more for their mortgages than the cost of the risk they present to the insurance fund. The agency’s significant change is a bold step forward that will help hundreds of thousands of families access the safe and affordable mortgage credit they need to become successful, long-term homeowners, ultimately strengthening the housing market and the overall economic recovery.
Over the past several years, a combination of strong management, significant premium increases, policies that reduce risk layering, and the overall economic recovery have put FHA well on track to meet or exceed its capital reserve requirement by 2016. The premium reduction announced today strikes the proper balance between increasing access to credit and maintaining fiscal prudence.
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