HUD News

Washington- Today marks the first anniversary of the Department of Housing and Urban Development (HUD’s) implementation of a 35% cut in the price of an annual mortgage insurance premium (MIP) paid by borrowers with Federal Housing Administration (FHA) insured mortgages. This reduction became effective on March 20, 2023, for all borrowers using FHA-insured mortgage financing to purchase or refinance a home. FHA’s Mortgage Insurance Premium reduction is a cornerstone of the Biden-Harris administration’s efforts to make homeownership more affordable and accessible, especially for the working families and households of color to whom FHA serves at rates that exceed other mortgage market participants.

Federal Housing Administration’s programs act as crucial onramps to the stability and wealth-building potential made possible by owning a home. The premium reduction has helped more than 682,000 borrowers save an average of $876 annually in the one year of its implementation. This resulted in them saving nearly $600 Million in only one year of their mortgages.

HUD Secretary Marcia L. Fudge said, “One year ago today, we cut mortgage insurance premiums and helped thousands of homeowners save more of their hard-earned money. This has been one of the crowning achievements of my tenure. I’m proud to reflect on the ways this historic action has already made a real difference in the lives of FHA borrowers, including many first-time homebuyers and households of color.”

Federal Housing Commissioner Julia Gordon said, “At a time when home buying has become more expensive and feels out of reach for many, the MIP cut puts money back into the pockets of American homebuyers and helps more well-qualified borrowers achieve the benefits of homeownership. Our ability to make such a significant premium reduction was based on a solidly performing Mutual Mortgage Insurance Fund in fiscal year 2022 and prudent risk assessment of our portfolio.”

This is a crucial step to make homeownership more attainable for people. This will help homebuyers who are not able to achieve homeownership otherwise.

About FHA’s Annual Mortgage Insurance Premium (MIP)

FHA Mortgage Insurance makes way for the easier availability of mortgage financing for low and moderate-income households by reimbursing the lenders for the losses they have incurred when a loan defaults. The FHA’s mortgage insurance premium revenues counterbalance the insurance claims paid to lenders, allowing the program to run without needing government subsidies.

The annual mortgage insurance payment of the Federal Housing Administration is calculated as the percentage of the outstanding loan balance. For instance, if there’s an outstanding loan balance of $200,000 with 0.55% annual MIP, then the annual MIP amount would be $1100. The lender tends to assess the annual MIP via 12 equal payments included in the Borrower’s monthly mortgage payment.

The mortgage insurance payment refers to the portion of costs that are used to determine a household’s eligibility for mortgage credit. A lower Mortgage insurance premium makes the homebuyers qualified for FHA-insured mortgages and also expands homeownership opportunities for the qualified borrowers.