Now that the Federal Housing Administration’s coffers are stable, the agency should reduce its annual mortgage insurance premiums and eliminate a requirement that mortgage insurance be held for the life of the loan, the National Association of Realtors said in a letter to FHA Commissioner Carol Galante.
FHA fees make up nearly 25 percent of a monthly mortgage payment in 2014, and up to 375,000 renters would have purchased a home last year had they not been priced out of the market, according to NAR.
Were the FHA to loosen up on annual premiums and the insurance requirement, the rate of prepayments, which was at its highest level in nearly a decade in 2013, would slow, benefiting FHA’s reserves, NAR said. The trade group also noted that the agency could increase upfront premiums while lowering annual premiums and thereby continue replenishing its reserves.
In a March 12 column, Inman News columnist Ken Harney urged readers not to hold their breath for a break on FHA premiums, noting that instead, the agency plans to impose a new “quality assurance” fee on lenders participating in its programs. The likely reason is that the Obama administration would like to see FHA’s market share shrink to historical levels of about 10 percent in favor of private insurers, Harney said.