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If you’re football fan, you saw a great college football game that decided the National Champion on Monday night.
Alabama is considered to be the best college football team in the nation. Some believe they are good enough to compete with some pro teams. Don’t tell that to Clemson. They beat Alabama 35-31 in a hard-fought game that went down to last second.
To many this is considered an upset. The team that was supposed to win…didn’t. Sound familiar? Maybe a little like a recent political upset. Two candidates fought down to the wire with the winner not being who was expected.
Upsets do happen. Things don’t always turn out as we expect or as we would like. That’s life; that’s just the way it goes sometimes. You make the best of it and you move on.
But, after publically stating otherwise, FHA announced recently a rate cut in their annual mortgage insurance premiums. The main rate on a 30-year loan with an LTV above 95%, which determines the monthly amount a borrower pays for this coverage, is being cut from 85 basis points (.85%) down to 60 basis points (.60%) FHA Cut.
Was this cut done to help boost homeownership or to put the incoming President in a bind? A cut in the annual MIP reduces the amount of money flowing into the FHA insurance fund.
This fund covers losses sustained in the FHA loan programs from defaulted loans and foreclosed homes. To date, Republicans have been opposed to such a cut. Others say the fund is now doing just fine.
The rate cut will no doubt help lenders, consumers, and housing by making FHA loans more affordable. That will bring more business into the FHA programs. However, that will increase the risk to the fund as most FHA buyers are inexperienced, low to moderate income home buyers with lower credit scores. However, the lower rate may attract more experienced qualified borrowers carrying higher credit scores.
FHA will be in a better position to compete with the conventional loan market. More qualified borrowers bring more money into the FHA Insurance Fund. Good for FHA, but not so good for the private Mortgage Insurance companies, and the potential impact to the new Fannie and Freddie low down payment programs?
Much is riding on whether President-Elect Trump will reverse the premium cuts. Was the timing of this premium reduction done to put him in a tough spot? He can kill the cut and look anti-housing and anti-consumer or let it stand and fly in the face of fellow Republicans.
What will Mr. Trump do? Will we have another upset? Or will some people be upset at his decision? I guess we’ll all have to wait until January 20th to find out what he’ll do once becomes President and determines how he wants to play the game.
Cut or no cut, we’ll need to make the best of it and move on…
