FHA Homebuyers May Get Payment Relief in Future

Dated: November 17 2022

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The National Association of REALTORS (NAR) which I am a member of is requesting Congress to reduce the Mortgage Insurance Premium (MIP) for FHA borrowers. Over the years, the shifting MIP requirements have put more restrictions and costs on FHA buyers.

 

First of all what is MIP? When a borrower doesn’t have a certain percentage down payment, typically 20%, the lender charges mortgage insurance to the borrower that is added in as part of their monthly payment. This insurance helps the lender recoup money in the event the borrower forecloses hence it’s called “insurance”. Insurance for the lender. Decades ago, FHA loan holders could easily get the MIP removed from their monthly mortgage payment once their loan balance was 78% of their home value. Meaning the borrower had 22% equity in the home. This happened with the lender ordering up an appraisal and if the value of home was 22% or more of the loan balance the lender would automatically remove the MIP cost in the monthly mortgage payment.  Then they changed the rules that the only way to remove MIP was to refinance the loan into a conventional loan thus causing refinance costs for the borrower. That rule is still true today.

 

Over a decade ago when we went through our great foreclosure crisis FHA tried to mitigate their losses by increasing the amount of the MIP. This put the burden of a higher costs on NEW FHA buyers from the actions of PAST FHA buyers to help keep the program solvent. Despite the recovering markets, Congress has not lowered this onerous cost to all new FHA buyers by bringing back down the MIP costs to new FHA buyers.

 

NAR is lobbying Congress to reduce the MIP costs for new FHA buyers due to increasing rates that is putting the dream of home ownership out of reach for many first time and low income homebuyers. National Association of Realtors® President Kenny Parcell issued the following statement Tuesday after the Federal Housing Administration (FHA) provided its fiscal year 2022 report to Congress.

"Realtors® applaud FHA for their impressive financial performance this past year and the agency's continuous efforts to address loss mitigation. Because of their strong financial stability, NAR once again calls on FHA to reduce the Mortgage Insurance Premium to help first-time and low- to moderate-income buyers as they face a high interest rate market. A substantial amount of FHA's insured loans in 2022 were given to first-time homebuyers, far outperforming other providers in the market to this demographic. NAR will continue working with FHA on extending their access to credit and other recourses to buyers across the country."

NAR is a strong voice made up of millions of REALTORS throughout the country that support homeownership and property rights. We hope our efforts can get through to Congress to take this burden off new FHA buyers. If you support this initiative you can also contact your Representatives and make your voice heard!

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Tonia Vickery Team

Finding your way home can seem like a long journey. I should know because I was raised here in Southern Missouri. I can tell you from firsthand experience that home is where the heart is and my heart ....

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