Millions of homeowners’ wallets took an unexpected hit last week, following a new executive action announced just hours after President Donald Trump’s inauguration.
Homeowners with Federal Housing Administration (FHA)-backed mortgages were anticipating a 0.25 percentage-point rate cut on insurance premiums to take effect Jan. 27. The move would have lowered overall payments by an average of $500 a year for millions of homeowners.
Those plans are now “suspended indefinitely,” according to the Department of Housing and Urban Development.
Why FHA-Backed Loans are Important
FHA-insured loans make it possible for first-time homebuyers to qualify for a mortgage, even if they have bad credit or don’t have a lot of cash for a down payment.
The FHA-backed loan program is an important consumer option in the home loan market because it mitigates the risk lenders face when they make loans to homebuyers who might not otherwise qualify for them.
Homeowners are required to purchase two kinds of insurance to qualify for a FHA loan. One of the insurance premiums is paid upfront, while the other is rolled into the monthly mortgage payment.
Those monthly premiums are often quite high and can be a burden to cash-strapped families. The expected 0.25 percentage point rate cut would have reduced monthly payments and given struggling homeowners some extra breathing room.
What to Do If You’re Affected By the FHA Mortgage Fee Reversal
If you’re impacted by the president’s decision to reverse the FHA’s insurance premium rate cut, there’s not a lot you can do about it except contact your state and local representatives and (nicely) vent about it.
Those of us expecting to save an extra $500 per year will simply have to figure out how to make it up somewhere else, but I have faith my fellow Penny Hoarders.
If that sounds like too much work, just give up coffee.
Your Turn: Does the FHA insurance premium cut reversal affect you?
Lisa McGreevy is a staff writer at The Penny Hoarder. She’s really good at sleeping.