Please wait as we prepare your PDF file ....

Mission Chronicle Blog

Search Blog

our goal is to help you stay informed by providing timely and interesting articles.

Where are consumers feeling the pinch of the MIP-reduction-that-wasn’t?

03/28/2017

Download PDF

January’s administration change left some homebuyers with the somewhat unexpected side effect of whiplash. The source? An 11th-hour mortgage insurance premium (MIP) rate reduction — and then a stroke-of-midnight repeal of that reduction.

It’s politics as usual on one hand, but on the other hand, this reduction-and-repeal dance had a real impact on some markets where lots of buyers are leveraging Federal Housing Administration (FHA) loans — or where housing costs are unusually high. That’s what some new numbers show, courtesy of National Association of Realtors (NAR) economists.

What happened?

In January, the FHA announced that it planned to cut mortgage insurance premium rates by a quarter of a percentage point (25 basis points), from 0.85 percent to 0.60 percent, starting January 27. Borrowers whose down payment is less than 20 percent of the appraised value of the property must pay mortgage insurance on the loan — some FHA loans allow borrowers to put down as little as 3.5 percent.

The rate reduction was in line with NAR recommendations, says Ken Fears, NAR’s director of regional economics and housing finance.

“We first took a look at this last spring,” Fears noted. “A year ago, we began to push for a reduction; we didn’t necessarily specify a particular number, but we gave a window of 10 to 25 basis points.”

At that point, as NAR’s analysis from last year notes, the FHA’s books were looking healthy enough to give consumers a bit of a break.

“The health of the FHA’s Mutual Mortgage Insurance Fund, which pays FHA lenders when borrowers default on FHA-insured mortgages, has improved for four straight years, gaining $44 billion in value since 2012, according to HUD. The fund’s capital ratio now stands at 2.32 percent of all insurance in force,” Inman reported in January.

And because mortgage rates had been at near-historic lows for a while, it was reasonable to expect they’d eventually go up — which has officially happened, and mortgage rates could see further increases still — so it made further sense to consider a mortgage insurance rate reduction.

“If you reduced the fee slightly, it would benefit consumers — and as long as the rate remained above the break-even level, you’d continue to add to the reserves,” Fears added.

However, a week before the new mortgage insurance premium rate was supposed to kick in, on January 20, President Donald Trump indefinitely suspended the rate reduction.

Who’s hurting?

Fears says his findings for where consumers are feeling the effects of this rate reduction repeal are pretty much in line with his expectations:

Buyers in high-cost markets Buyers in markets with heavy FHA loan utilization

“A lot of the areas that are impacted are what turned out to be the President’s base in the selection,” said Fears. “Pennsylvania, Ohio, smaller markets in Illinois — a lot of those are very heavy users of FHA loans.”

FHA_Impact_2015

var divElement = document.getElementById(‘viz1490655368180’); var vizElement = divElement.getElementsByTagName(‘object’)[0]; if ( divElement.offsetWidth > 800 ) { vizElement.style.width=’564px’;vizElement.style.height=’599px’;} else if ( divElement.offsetWidth > 500 ) { vizElement.style.width=’564px’;vizElement.style.height=’599px’;} else { vizElement.style.width=’100%’;vizElement.style.height=(divElement.offsetWidth*1.77)+’px’;} var scriptElement = document.createElement(‘script’); scriptElement.src = ‘https://public.tableau.com/javascripts/api/viz_v1.js’; vizElement.parentNode.insertBefore(scriptElement, vizElement);

What next?

“With time, the FHA’s books are just going to continue to improve in the near term — that’s going to raise the onus more and more on why we are keeping those rates high,” predicted Fears. “We’ll have a lot more clarity, and there will be an incentive to change it.”

He adds that the Trump administration “has signaled that it’s going to review a number of policies that it’s frozen on implementation,” so there is hope that the rate reduction will be implemented at some point.

However, don’t wait for it, is his advice.

“People need to keep in mind that we don’t know when and if this will occur, so don’t wait to try and time it,” Fears said. “At the end of the day if you find a great opportunity to put someone in a house that they can afford and will enjoy, that’s what’s really the most important thing.”

Email Amber Taufen

Like me on Facebook! | Follow me on Twitter!

Source: click here

Read More

INSPIRED, INTELLIGENT, INSIGHTFULL

STAY INFORMED WITH TIMELY AND INTERESTING ARTICLES FROM OUR BLOG, MISSION CHRONICLE. OUR ASPIRATION IS TO PROVIDE REALTORS AND OTHER REAL ESTATE INDUSTRY PROFESSIONALS WITH EXCEPTIONAL RESOURCES AND SHARE OUR KNOWLEDGE TO PROPEL YOU TO YOUR GOALS.

  • ProperSign is another step toward fully digital transactions

    Have suggestions for products that you’d like to see reviewed by our real estate technology ex...

  • The 8 mistakes to avoid when designing a virtual home tour

    Now more than ever, virtual home tours are an invaluable asset for agents looking to educate and ins...

  • Real Grader helps keep agents’ online reputation on track

    Have suggestions for products that you’d like to see reviewed by our real estate technology ex...

  • ClosingLock aims to lock down wire fraud

    Have suggestions for products that you’d like to see reviewed by our real estate technology ex...

  • The top 3 priorities buyers place alongside location

    The past year has brought unparalleled attention to luxury properties in suburban and vacation marke...

  • CoreLogic launches consumer search with OneHome

    Have suggestions for products that you’d like to see reviewed by our real estate technology ex...

  • What you need to know about 2020’s accelerated luxury market

    It’s safe to say that this year has not been the one we expected. In March, it was anybody’s gue...

  • Up your social media look with Feed Appeal

    Have suggestions for products that you’d like to see reviewed by our real estate technology ex...

  • From video to VR: why VR home tours are a must-have

    This has been a year of challenges and transformation for all industries, and the luxury real estate...

  • ReferMe IQ uses old business to earn you new business

    Have suggestions for products that you’d like to see reviewed by our real estate technology ex...

December 2020
Mon Tue Wed Thu Fri Sat Sun
 123456
78910111213
14151617181920
21222324252627
28293031  

  • Polls

    What information you are looking for?

    View Results

    Loading ... Loading ...
  • Last month Results

    How Is My Site?

    • Good (100%, 3 Votes)
    • Excellent (0%, 0 Votes)
    • Bad (0%, 0 Votes)
    • Can Be Improved (0%, 0 Votes)
    • No Comments (0%, 0 Votes)

    Total Voters: 3

    Vote

    Loading ... Loading ...