Plan Trims Cost of Some Mortgages
Making affordable home ownership
The plan to cut Federal Housing Administration insurance premium on mortgages with low down payments would initially save a typical borrower $1,000 a year on a $200,000 loan.
The FHA program is geared toward borrowers who have little cash for down payments, such as first-time home buyers. The FHA doesn’t make loans, but insures lenders in case of default on mortgages with down payments of as little as 3.5%. Borrowers must pay for the insurance.
‘This action will make home ownership more affordable for over two million Americans in the next three years,’ said HUD Secretary Julian Castro in a statement. ‘By bringing our premiums down, we’re helping folks lift themselves up so they can open new doors of opportunity.’
Getting a mortgage is too difficult for many Americans, say administration officials. With a housing recovery under way, albeit in fits and starts, the White House has shifted it’s focus toward improving access to credit for many families that face tighter mortgage standards and sluggish wage growth.
During the past few years, lenders have said that Justice Department litigation and draconian regulatory penalties have led them to give loans to only pristine borrowers, even if riskier borrowers would qualify for government backing. The FHA has been pressing to clarify the consequences to lenders for making mistakes on loans it insures.
Taken from WSJ article Jan 8