President Obama’s administration is making a slew of decisions before their time dwindles short, including the cut back on mortgage-insurance premiums. These premiums originated from a government program popular with first-time home owners without the proper funds for a down payment. This move may counteract the swell of rising interest rates.
The Department of Housing and Urban Development gave a statement on Monday that announced the annual fees charged by the Federal Housing Administration charges are being cut by a quarter of a percentage point. These charges guarantee the mortgages the FHA backs. The yearly expense for most borrowers will amount to .06 percent of the initial loan balance. The Department of Housing and Urban Development said that homeowners insured with this new FHA policy will save, on average, $500 this year. The cut is to take place on January 27.
The incoming Trump administration, however, could reverse this decision. Republican object to this lower fee, citing the danger it puts taxpayers in due to the lower funds the FHS works with in mortgage defaults. The cut puts bigger businesses in danger too, as private insurers must now compete with the FHA’s new rates. After the announcement, investors like MGIC Investment Corp., and Essent Group Ltd. Fell between 2 to 4 percent in shares.
Julian Castro, secretary of HUD, said he had no reason to believe the Trump administration would alter the cut. On a call with reporters, Castro confirmed that the transition team was made aware of the premium cut before the news broke to the public. Ben Carson, Trump’s nominee for HUD secretary, did not comment on the issue. Carson’s confirmation hearing will begin on Thursday, facing no small amount of opposition. Outgoing HUD secretary Castro said he was “concerned about the possibility of going backward over the next four years” should Carson be confirmed, but otherwise did not cite a specific concern of the cut being reversed.