Trump Raises Mortgage Costs for Many First-Time Homebuyers
Donald Trump promised to fight for working-class Americans, but one of his first acts as president was to make mortgages more expensive for many first-time homebuyers for the benefit of mortgage insurers.
In a move long pushed by corporate lobby and conservative advocacy groups, Trump signed an executive order indefinitely suspending a scheduled rate cut for mortgage insurance required for loans backed by the Federal Housing Authority (FHA). Such loans have enabled millions of low- and middle-income first-time buyers to achieve their dream of home ownership.
The Department of Housing and Urban Development (HUD) announced the mortgage insurance rate cut earlier this month. It would have reduced the FHA monthly mortgage insurance premium by a quarter point, from 0.85 percent to 0.6 percent, reducing monthly mortgage bills by at least hundreds of dollars. A borrower who put down less than 5 percent on a $600,000 home would have saved $1,500 annually. The Obama administration estimated new FHA borrowers would have saved an average of $500 a year after the cut.
“According to our estimates, roughly 750,000 to 850,000 home buyers will face higher costs, and 30,000 to 40,000 new home buyers will be left on the sidelines in 2017 without the cut,” William E. Brown, National Association of Realtors president, said in a statement. “We’re disappointed in the decision but will continue making the case to reinstate the cut in the months ahead.”
In a letter to real estate professionals announcing the rate cut suspension, HUD said further consideration is needed on any “future adjustments” to insurance premium rates. “FHA is committed to ensuring its mortgage insurance programs remains viable and effective in the long term for all parties involved, especially our taxpayers,” the letter said.
At his confirmation hearing last week, Ben Carson, the new secretary of housing and urban development, said he was “surprised” to see the outgoing Obama administration announce “something of this nature done on the way out the door.”
Trump-watchers were not surprised by the new executive order, although some expressed surprise that the new president moved so quickly on this particular issue. Others noted the inconsistency between a campaign full of promises to protect working-class Americans and making first-time home loans more expensive.
The executive order delighted conservative special interest lobbies and advocates. The American Enterprise Institute (AEI), a Washington, DC-based think tank, has been a staunch opponent of what it calls “short-sighted government housing policies,” including mortgage insurance premium cuts.