Trump’s first executive action: Cancel Obama’s FHA mortgage help for first time home buyers.
Among Trump’s first actions as president was sending an emergency order (pdf) to US lenders and real estate agents that increased the amount of money first-time home buyers and low-income borrowers must pay to get a mortgage. The move reverses a decision by the Obama administration earlier this month to cut the cost of federal mortgage insurance by 0.25%, enough to save the average borrower $446 a year.
The FHA only insures qualified loans for houses below a certain value, depending on the local market, and for borrowers with a total debt-to-income ratio, including their future home payments, of less than 43%. Today, the FHA insures 4.8 million single-family home loans.
What Trump’s first executive action on mortgage premium cuts means for you
What happened?
In the first hour of Trump’s presidency, the U.S. Department of Housing and Urban Development sent a letter to lenders, real estate brokers and closing agents suspending the 0.25 percentage point premium rate cut for Federal Housing Administration-backed loans. The new rates, announced on Jan. 9, would have gone into effect on Friday.
Who does the cut affect?
The action will affect millions of homeowners with an FHA-backed mortgage. FHA backs about 16% of the country’s new mortgages. FHA loans offer easier credit requirements, lower down payments and smaller closing costs, according to the U.S. Department of Urban Housing and Development.
William E. Brown, the president of the National Association of Realtors, said the cut allowed more people to qualify for a mortgage because more borrowers could meet the debt-to-income ratio required to borrow money.
How much will it cost homeowners?
That cut would have saved home buyers about $29 a month on a $200,000 mortgage. U.S. Sen. Chuck Schumer, a Democrat from New York, said the cut equaled an average of $500 per year.
