Federal Housing Administration to Reduce Annual Insurance Premiums, Saving Homeowners an Average $500

Source:  CNBC

The Federal Housing Administration (FHA) will reduce the annual premiums most borrowers will pay by a quarter of a percent, or 25 basis points, for most new mortgages with a closing or disbursement date on or after Jan. 27.

"The move by U.S. Housing and Urban Development Secretary Julian Castro to lower the FHA annual mortgage insurance premium is welcomed news," said C.A.R. President Geoff McIntosh.  "With recent hikes in interest rates, the expected average savings of $500 this year will help offset the higher cost of homeownership for many prospective homebuyers and put them on the path to achieving the American Dream."

Meanwhile, Castro said consumers are facing higher credit costs as mortgage interest rates increase.

"After four straight years of growth and with sufficient reserves on hand to meet future claims, it's time for FHA to pass along some modest savings to working families," said Castro.

- The new rates come as the FHA enters a fourth straight year of improved economic health, the administration said.

- The FHA gained $44 billion in value since 2012.

- "We've carefully weighed the risks associated with lower premiums with our historic mission to provide safe and sustainable mortgage financing to responsible homebuyers.  Homeownership is the way most middle class Americans build wealth and achieve financial security for themselves and their families," Ed Golding, principal deputy assistant secretary for HUD's Office of Housing, said in the report.

- And for now, Fannie and Freddie are hiking the benchmark rate again, from 3.875 percent to 4.25 percent.

---