Former San Antonio Mayor, now current HUD secretary, Julian Castro looks to realign the direction of the Department of Housing and Urban Development. The news came last week as Castro and President Barack Obama announced a cut in the premiums charged by the Federal Housing Administration as a way to expand homeownership among lower-income borrowers. The new premium structure estimates that 2 million borrowers could save up to an average of $900 annually over the next three years if they purchase or refinance homes.
The announcement of an FHA premium cut was met with criticism; some speculating that this is what lead to the 2008 housing crisis in the first place. After the housing bubble burst, the protocol for mortgage qualification changed making the process more difficult for the potential home buyer. Buyers had to adhere to a long list of updated policies and restrictions to ensure that only highly qualified buyers were approved for mortgages. HUD Secretary Julian Castro believes that lessons learned from the past can now help more Americans achieve home ownership the right way.
The annual fees the Federal Housing Administration charges to guarantee mortgages will be cut by 0.5 percentage point, to 0.85 percent of the loan balance. The new structure looks to reverse years of increases in FHA premiums to offset losses caused by defaults on mortgages it approved after the housing crisis. Housing industry participants say increases in annual fees squeezed buyers with modest incomes out of the market.
News of the new premium structure will ultimately lead to an increase in pre-qualifications and applications for refinancing within the mortgage lending industry. Sarma will also experience this increase as we anticipate to service new and existing mortgage clients. An increase in credit reporting volume in response to this announcement is also expected as the news spreads nationwide.
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Categories: News & Press Releases