Courtney 'Dumbfounded' By FHA Executive Action That Will Hurt First-Time Homebuyers
WASHINGTON, D.C.—Today, Congressman Joe Courtney (CT-02) spoke out on the House floor against an executive action taken by President Donald Trump on his first day in office to suspend a scheduled rate decrease on mortgage insurance for first-time homebuyers through the Federal Housing Administration (FHA):
Click here to watch Courtney's floor speech delivered on January 23
Excerpts from Courtney's speech as delivered:
"There is no better sign of a healthy economy than a healthy real estate economy. We know this from the bitter experience of the real estate and financial collapse in 2008. In my state, in Connecticut we are barely at a place where home sales and home equity have come in a positive direction and are climbing back to what existed in 2008 when the collapse occurred.
"There was a rate reduction that was slated to go into effect on January 27th from .85 percent down to .65 percent – President Trump canceled that reduction. So what does that mean? The National Association of Realtors, which is hardly a partisan group, has in the wake of that order released numbers that about 750,000 to 800,000 homeowners are going to be adversely affected by losing those savings – that are just going to go to the government by the way. Those mortgage premiums are basically paid into the government and right now there is a surplus in that account and that's why the rate reduction was slated to go into effect – there is no reason for the government to be overcharging for mortgage insurance given the healthy balance that exists in that mortgage insurance account.
"They also calculate that about 30,000 – 40,000 homebuyers will not buy a home in 2017 because of that order that was issues on Friday. Again, these are people who would save $500 - $1000, which is going to come out of their pocket in terms of higher payments because of this executive order, are basically going to be priced out of buying a home. And the home builders, the real estate agents the people closest to the market and clearly not partisans, I mean I know these people in my district and they are staunch Republicans in many cases, are dumbfounded that that order of all things within the first hours of the new administration would be a priority."
On January 9, the Department of Housing and Urban Development (HUD) under former Secretary Julian Castro announced a 25 basis point reduction on mortgage insurance premiums paid to FHA, to apply to FHA-insured loans closed on or after January 27. Within an hour of his inauguration, President Trump issued an administrative order to suspend this reduction from taking effect.
HUD estimated that a family borrowing $200,000 would save $500 per year with this cut. It would have meant a premium of 0.60% for most homebuyers. Current premiums (pre-cut), set since the last cut in 2015, are 0.85% of the outstanding loan balance for loans with initial loan-to-value ratio about 95% and 0.80% of loan balance for loans with initial loan-to-value ratio under 95%. FHA insures over 95,000 loans in Connecticut alone, and nearly 13,000 Connecticut homebuyers were able to purchase homes with FHA guarantees in 2016.
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