July 31, 2021

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Mortgage News

FHA will not cut premiums amid rising delinquencies

WASHINGTON – The Biden government will not cut the Federal Housing Administration’s mortgage premiums anytime soon, the Department of Housing and Urban Development secretary said.

Lots of experts and investors in the mortgage industry had priced in an FHA premium cut under President Biden that predicts his administration will implement its goals of making housing more affordable.

In a statement Tuesday, HUD Secretary Marcia Fudge pointed to rising arrears and said HUD had no plans to cut mortgage insurance premiums as the FHA deals with the aftermath of the coronavirus pandemic.

“Given the current FHA crime crisis and our duty to manage risk, as well as the overall health of the fund, we have no short-term plans to change the premium rates on FHA mortgage insurance,” she said in the statement accompanying a report to Congress. “We will continue to rigorously evaluate our strategy and work transparently with Congress. Our number one priority is helping families keep their homes and stay safe as we work toward a just recovery. “

“Given the current FHA crime crisis and our duty to manage risk, as well as the overall health of the Fund, we have no short-term plans to change FHA mortgage insurance premium rates,” said HUD Secretary Marcia Fudge.

Bloomberg News

Although the FHA Mutual Mortgage Insurance Fund’s capital reserve ratio is “well above” the legal minimum of 2%, Fudge found that the percentage of FHA loans classified as “Serious Criminal” was increased. That rate rose to 11.89% in the second quarter of this year from 11.59% in the last quarter, according to the FHA’s report to Congress.

Former FHA Commissioner Dana Wade, who served under former President Donald Trump, also cited uncertainty surrounding the pandemic and the short-term development of FHA loans as the reason the agency did not cut premiums in November.

Still, Fudge said the FHA remains in solid financial position to support troubled borrowers. The American bailout plan, signed on March 11, should continue to support both the agency and homeowners, she said. The FHA has also extended its foreclosure and eviction moratorium to June 30, offering borrowers extended forbearance on their loans.

“The actions we are taking now will help position the FHA program so that it can continue to serve its critical mission well into the future,” said Fudge.