Turns out that maybe one of his first decisions after taking office was a good one. He suspended the outgoing administration’s move to further lower the FHA mortgage insurance premiums.
In their annual report to Congress, the FHA indicated that although the fund remains just above the minimum capital requirements, its capital ratio and economic net worth actually declined.
Declined to such levels that, had the FHA premiums been cut, the MMI fund would not meet the required minimum reserves. That’s dangerous for FHA, lenders, and taxpayers.
With the economy improving and other products coming to market, now is the time for FHA to refocus on its core mission to provide home financing for low to moderate income homeowners and buyers. A goal echoed by the new HUD Secretary, Ben Carson.
FHA continues to do good things and is a vital cog in the wheel of home financing. It is extremely important that we have a strong FHA that is supported by a strong MMI fund. Just think where we’d be if it had not been for the FHA mortgage loan programs over the past several years.
With rates potentially rising, fewer homes on the market and a move into a purchase home market, loans in 2018 will be a little tougher to come by.
There are fewer affordable homes for those in the low to moderate income range. So, once again, we’ll hear a cry to reduce the FHA premiums so that more buyers may qualify for higher loans. Now may not be the right time to do so.
Other reports show that consumer debt is once again on the rise. The biggest jump is in credit card debt.
With things getting a little better, we must be careful that consumers do not bite off more than can chew, especially when it comes to buying a home.
They need to find a home that they can afford and continue to maintain. If not, we may once again realize high mortgage defaults putting a strain on the FHA insurance fund, the mortgage markets, and the economy. Been there; done that…
Secretary Carson said it well, “The fiscal health of FHA demands our constant attention and vigilance to ensure we can continue providing sustainable homeownership opportunities to working families without exposing taxpayers to excessive risk, our duty is clear—we must make certain FHA remains financially viable, so future generations can build wealth and climb the economic ladder of success.”
So, it looks as though FHA will continue for now to hold the line on any premium cuts. We made it through 2017 okay without them, it’s up to lenders to continue to find ways to operate and generate their business without these cuts in 2018.