Tags: Barack Obama | FHA | homebuyers | mortgage rates

As Housing Slump Endures, Feds to Cut Mortgage Fees

Image: As Housing Slump Endures, Feds to Cut Mortgage Fees
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By    |   Wednesday, 07 Jan 2015 02:29 PM

President Barack Obama is ready to announce plans to slash federal mortgage fees by just over half a percentage point in hopes of boosting the nation's lagging housing market, which has not kept pace with other economic improvements in recent years.

Obama is planning to use a speech Thursday in Phoenix to announce plans for the Federal Housing Administration to cut the mortgage guarantee fees, sources close to the White House told Bloomberg News.

Since 2011, the FHA has offset losses caused by defaulted mortgages by increasing premiums, and according to housing industry professionals, the increases, which now equal 1.35 percent of a loan's balance, are keeping many first-time homebuyers from obtaining mortgages. Before the increases, the annual rate was at .55 percent, reports Bloomberg.

Meanwhile, the FHA's insurance fund is once again in the black, posting its first positive amount in two years in fiscal year 2014. Last year, the fund had to pull $1.7 billion from the Treasury Department.

Under the executive order, the FHA's rate would drop from its present 1.35 percent down to .85 percent. FHA must keep enough cash in its $1.1 trillion holdings to cover all projected losses, and must keep a two percent cushion of its value, which is not expected to happen until fiscal year 2016.

While White House officials would not confirm the announcement, senior adviser Dan Pfeiffer said Wednesday in a blog post that Obama was going to "announce a new executive action that will help more responsible Americans own a home," reports The Hill.

“Homeownership is out of reach for too many Americans  —  families who can afford to buy a home, but find themselves shut out because the lending market is too tight,” he continued.

While the cut will be less than one percent, it will still lower monthly payments for people who have federally backed mortgages.
 
The news may be good for those people, but share prices dropped Wednesday for private mortgage insurers, who compete with the government program.

Radian Group Inc., based in Philadelphia, saw its shares drop by 3.2 percent to $16.01 at around 10 a.m. Wednesday in New York, MGIC Investment Group lost 2.3 percent and Essent Group LTD went down by 2.7 percent, Bloomberg reports.

The losses came after Radian went up by 18 percent in 2014 and more than doubled in 2012 and 2013.

Obama's Thursday trip is part of a three-day tour he is taking to preview his upcoming State of the Union address. On Wednesday, Obama planned to cheer the auto industry's recovery during a trip to a Ford plant in Detroit, reports The Detroit News.

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President Barack Obama is ready to announce plans to slash federal mortgage fees by just over half a percentage point in hopes of boosting the nation's lagging housing market, which has not kept pace with other economic improvements in recent years.
FHA, homebuyers, mortgage rates
438
2015-29-07
Wednesday, 07 Jan 2015 02:29 PM
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