NAR President Chris Polychron, executive broker with 1st Choice Realty in Hot Springs, Arkansas, issued the following statement at the conclusion of today’s hearing of the U.S. House Financial Services Committee, The Future of Housing in America: Oversight of the Federal Housing Administration:
“The new mortgage insurance premium reduction policy implemented last month by the Secretary of the Department of Housing and Urban Development, Julian Castro, will help more first-time borrowers achieve homeownership without increasing the risk of mortgage defaults or of another taxpayer bailout.
“Realtors® support safe lending practices based on strong underwriting requirements, and the Federal Housing Administration’s new prices encourage sustainable homeownership for creditworthy borrowers. FHA is not lowering its underwriting standards or luring irresponsible borrowers into homeownership, instead it is resetting its fees to appropriately balance anticipated risk while still making a profit to support its funds.
“After four years of increases, the fees had become so expensive that last year alone, roughly 234,000 creditworthy borrowers were priced out of the market.
“For first-time buyers in particular, the premium reduction could not have come at a better time. As the cost of FHA premiums increased, the percent share of first-time buyers using FHA-backed loans shrank from 56 percent to 39 percent. Meanwhile, an NAR survey released in late 2014 revealed that the annual share of first-time buyers fell to its lowest level in nearly three decades.
“The new policy lowers the cost of FHA’s mortgage insurance premiums by 50 basis points, which translates into an average savings of $900 a year for future homeowners and current borrowers who refinance. NAR estimates that the reduction will price-in an additional 1.6 million to 2.1 million renters, along with many trade-up buyers, and could result in 90,000 to 140,000 additional annual home purchases.
“FHA’s new pricing is not going to magically bring all of the missing millennials to the closing table, but they, and the housing market, will certainly benefit from the reduction.”