As one of his first priorities after taking oath today, President Donald Trump suspended a January 9 rule from the Department of Housing and Urban Development that was meant to reduce the cost of mortgage insurance for first-time homebuyers.
The Federal Housing Administration rule was set to lower the premiums of mortgage insurance, which is required for homeowners when they take out a government-backed housing loan. As first-time buyers know, these premiums are pricey and can drive up the cost of monthly payments. The FHA estimated that the new rule would help about one million homeowners who have FHA loans and save the average homeowner $500 per year.
Some Republicans didn’t like reducing the cost of mortgage insurance because they felt the higher premiums helped to protect the country against risky loans that could put the country back into a foreclosure crisis. But in a statement January 9, outgoing HUD Secretary Julian Castro said there was no danger of this happening. “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.”
With this move, Trump’s team may be moving forward with his plan to roll back many recent reforms which were put in place to battle discrimination in the housing market. Eliminating a simple, cost-saving way to reduce monthly payments for the people who need it most could have been a motivating incentive for first-time buyers. In the midst of a housing shortfall that’s made most large cities unaffordable to the average citizen, this decision may deny even more Americans the dream of homeownership.
Update: According to a statement from the National Association of Realtors, suspending the rule will put the price of a home out of reach for about 40,000 Americans. “According to our estimates, roughly 750,000 to 850,000 homebuyers will face higher costs and 30,000 to 40,000 new homebuyers will be left on the sidelines in 2017 without the cut.”