White House Rightly Reduces Unnecessary And Onerous Mortgage Insurance Costs For Lower-Wealth Homebuyers

The Biden-Harris administration will lower mortgage insurance premiums that have long punished homebuyers who make below-standard down payments, Vice President Kamala Harris and Secretary of the Department of Housing and Urban Development (HUD) Marcia Fudge announced Wednesday at an event with National Community Reinvestment Coalition (NCRC) President and CEO Jesse Van Tol and other leading economic justice advocates. 

“There is no good reason for the government to lay such steep extra charges on people who just don’t have the savings to put 10 or 20 percent down at purchase – especially when such buyers tend to come from parts of our society that have historically been excluded from homeownership in a variety of ways,” said Jesse Van Tol, NCRC President and CEO. “I applaud Vice President Harris, Secretary Fudge and everyone in the administration who is working to fix flawed policies like this so that the American people can live in a more just economy. Their decision to lower these insurance premiums – a move NCRC urged in our 2023 Policy Agenda – is a valuable, tangible boost for underserved families who are trying to invest in their future through homeownership.

“I hope the administration’s next steps on these issues will continue to reflect the advice and insight of groups like NCRC and our 700-plus member organizations,” Van Tol added. “Lowering the large up-front closing costs imposed on this same group of borrowers and shortening the length of time they are required to pay annual premiums would consolidate the progress announced today. The White House also has a historic opportunity to strengthen affordable housing missions at Fannie Mae and Freddie Mac, and to take them out of conservatorship so they can fully support the same goals served by today’s policy change.”

The administration leaders announced the reduction in Mortgage Insurance Premiums (MIP) for Federal Housing Administration (FHA) loans on Wednesday afternoon.  HUD will slash the annual MIP rate by a third – from 0.85% to 0.55% – “for most new borrowers” as of mid-March 2023. These lower borrowing costs will buoy long-term wealth-building efforts for hundreds of thousands of Americans each year, according to a White House fact sheet on the change.

The White House’s choice to make the announcement at Bowie State University, the oldest Historically Black College/University (HBCU) in Maryland, underscored the special urgency of such policy changes for people of color. More than one in four FHA borrowers are people of color and the vast majority of them are first-time homebuyers. Hundreds of thousands of people will benefit from the change, the White House said, saving a projected $900 per year on average. 

NCRC had recommended lowering MIP costs for lower-net-worth borrowers in its 2023 Policy Agenda not only because of their positive effects on homeownership and economic opportunity writ large, but also because the previous charges were far beyond what is necessary to ensure market stability. The insurance fund that uses MIP payments to safeguard the broader mortgage market currently has more than five times the capital ratio Congress requires. The more ambitious steps on MIP rules that NCRC recommends would take advantage of that vast surplus at a key time for the future of homeownership and economic mobility nationwide.