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Dept. Of Housing And Urban Development Has Suspended Plan To Offer FHA Premium Cut

Wayne Duggan

Less than one hour after Donald Trump was officially sworn into office on Friday, the Department of Housing and Urban Development suspended plans for a mortgage insurance rate cut on Federal Housing Administration (FHA)-backed mortgage loans.

Last Week Vs. This Week

In the final days of the Obama administration, the FHA announced it would be cutting annual premiums for most of its borrowers by 0.25 percent. For a borrower with a $200,000 mortgage, the cut would have reduced mortgage payments by $500 per year.

Some Republicans want to err on the side of caution with the FHA, which required a $1.7 billion bailout in 2013 when it could not cover its mortgage insurance responsibilities.

The Obama administration argued that the FHA balance sheet is much stronger these days than it was during the time it was dealing with the fallout from the mortgage crisis.

Most housing experts believed the FHA rate cut would have been good for the housing market to help offset the impact of rising interest rates.

FHA-backed mortgage loans are particularly popular among first-time homebuyers and those with poor credit. FHA-backed mortgage borrowers can qualify for a loan with as little as 3.5 percent down payment and a credit score as low as 580.

In theory, the suspension of the FHA rate cut should be marginally good news for Federal National Mortgage Assctn Fnni Me (OTC: FNMA) and Federal Home Loan Mortgage Corp (OTC: FMCC), which serve as alternatives to the FHA.

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