The House of Representatives passed a bill Tuesday that slashes the cost of upfront mortgage insurance for first-time homebuyers using mortgages backed by the Federal Housing Administration.
The Housing Financial Literacy Act of 2019, or H.R. 2162, stipulates that first-time homebuyers who complete a housing counseling program to learn about sustaining homeownership can get a 25-basis-point discount (0.25%) on their upfront mortgage insurance for an FHA loan.
The Mortgage Bankers Association applauded the bill’s passage.
“MBA has long advocated for increased access to housing counseling as a means to provide a more positive experience for first-time homebuyers unfamiliar with the homeownership process, as well as for other underserved communities,” the MBA said in a statement.
But the association also warned that adjustments to insurance premiums should be made carefully at HUD’s discretion so as not negatively impact the FHA’s insurance fund.
“While MBA conceptually supports the goals of this bill, including improving financial literacy and making homeownership more attainable, MBA also recommends that any legislative change to FHA’s premium structure maintain HUD’s discretion to set insurance premiums that are consistent with actuarial evidence accepted by HUD,” it stated.
Rep. Joyce Beatty, D-OH, who presented the bill alongside Rep. Steve Stivers, R-OH, said enhanced financial literacy has proven to be effective.
“Whether you are managing your credit, creating a budget, saving for retirement, or purchasing a home, understanding the basic principles of planning, saving, and investing for the future is vitally important,” Beatty said. “Studies show that pre-purchase housing counseling equips first-time homebuyers with the much-needed financial skills and tools to make informed financial decisions that ultimately benefit not only their families, but also the surrounding neighborhood and our entire economy.”
The bill will now move on to the Senate for a vote before it can make it to the president’s desk.
“I urge the Senate to support this common-sense bill that incentivizes first-time homebuyers to take greater control of their financial futures and provides greater opportunity for more Americans to realize the dream of homeownership in a financially responsible way,” Beatty continued.