The incoming Trump administration is likely to postpone a 25-basis-point reduction in the Federal Housing Administration’s annual mortgage insurance premium, housing policy sources said.
After he is sworn in on Friday, Donald Trump plans to issue an executive order freezing a number of actions by the Obama administration. The FHA premium reduction will be among the policies put on hold, according to a housing industry lobbyist. The Trump transition team was not immediately available for comment Wednesday.
The premium cut was slated to take effect Jan. 27. Housing and Urban Development Secretary Julian Castro announced the plan to reduce the mortgage insurance premium on Jan. 9.
Assuming Trump signs his executive order, his nominee for HUD secretary, Ben Carson, will have time to review the mortgage insurance premium reduction and decide whether it should take effect.
Several Washington sources said they expect the Trump administration to eventually rescind the FHA premium reduction.
“Given the reaction from Republicans on the Hill to the [premium] reduction, and Dr. Ben Carson’s own comments at his nomination hearing last week, lenders and borrowers are feeling the uncertainty, and ought to be prepared for the likelihood of the new administration reversing course quickly after the inauguration,” said a mortgage lobbyist.
The premium reduction would lower the FHA annual premium to 60 basis points, which is close to where it was before the housing crisis a decade ago.
Homebuyers also pay a 1.75% upfront fee when they take out an FHA-insured loan.
Some mortgage-backed securities analysts estimate the premium reduction could generate an additional $50 billion in single-family loan endorsements for FHA in 2017. However, others say the potential impact would only be incremental.