In a speech earlier in Phoenix, Arizona, the topic brought to order was housing and the middle class. President Obama speaks on his plans regarding homeownership and the overall recovery of the housing market. Here’s a brief look into what he says and how this affects the average homeowner or new house buyer under FHA.
Brief rundown of Obama’s speech
He starts the meat of his speech with “America is coming back.” Aptly, he refers to the growing house market after the 2008 crash. He briefly details about foreclosure and how certain lenders are solely worried about profits. However, his concern is on the middle class and affordability. Heavy emphasis is put on protecting the responsible homeowners and cracking down on irresponsible lenders. In fact, he’s worked with states and giving settlements of 50 billion dollars to 1.5 million people due to bad banks lending to borrowers corruptly. Obama consulted Congress to “wind down on government-backed companies known as Fannie Mae and Freddie Mac.” Bailing out is not an option. To keep it brief, those mistakes should not be repeated again.
President Obama lowers MIP
Obama announces lower FHA rates
In an effort to keep this momentum going, Obama states, “Starting this month…the FHA will lower its rate to save borrowers $900 a year.” Lower premiums will make homes more affordable for millions. In turn, this will create a much healthier buying market and even increase market values of homes under FHA. The annual MIP will drop from 1.35% to .85% for new FHA borrowers. Current FHA borrowers, who refinance, can also see this drop as well.
HUD’s press release on the matter
According to HUD, this new MIP will save money for 2 million FHA homeowners and create a spur of 250,000 new homebuyers to purchase their first home over the course of 3 years. Talk about a massive upswing since the market crashed! This is due in part to FHA’s Mutual Mortgage Insurance Fund (MMIF). FHA’s recent report to Congress indicates that the single-family insurance fund has improved drastically adding $21 billion in the past two years. There are new safeguards imposed to homeowners who’ve fallen underneath the rug in the past due to certain lenders’ corrupt business practices for profits. As a result, the new reduction will help lower the cost of housing for 800,000 FHA homeowners. HUD states, “FHA’s new annual premium prices will take effect toward the end of the month. FHA will publish a mortgagee letter detailing its new pricing structure.”
How does this affect home buying across the nation?
While Obama began in Phoenix, this is a stepping stone for what’s to come. Lenders have to make sure they are responsible for lending money to current and new borrowers. As stated before, mistakes of the past cannot be repeated. With Congress cracking down on bad practices, more borrowers will be safe from impending house crises. However, Obama pledges to new homeowners to be responsible as well. The new premium only works well for those that have a plan in place to pay mortgages on time. Creating an opportunity like this makes it a two-way street. Both the lender and borrow must do their part to keep improving the housing situation across the board.