President Barack Obama said in a speech Thursday that mortgages need to be more accessible and affordable to creditworthy families to spur a stronger housing market. He said lowering Federal Housing Administration mortgage insurance premiums is one way to achieve that, potentially paving the way for hundreds of thousands of new home buyers to enter the real estate market.
photo credit: Barack Obama via photopin cc
“I want to talk about helping more families afford their piece of the American dream, and that is owning their own home,” Obama said in a speech during a visit to Phoenix on Thursday as part of a weeklong tour across country focused on the economic recovery. “Buying a home’s always been about more than owning a roof and four walls. It’s about investing in savings and building a family and planting roots in a community.”
Obama announced that FHA mortgage insurance premiums will be lowered by half a percentage point, moving from 1.35 percent currently to 0.85 percent. The lower costs are expected to save borrowers an average of $900 annually.
The FHA is a major funder of mortgages for first-time home buyers, as well as lower- and middle-income Americans, due to its low downpayment requirements of 3.5 percent of the purchase price.
The National Association of Realtors estimates that a reduction in FHA premiums has the potential to bring in 90,000 to 140,000 additional annual home purchases.
“By bringing our premiums down, we’re helping folks lift themselves up so they can open new doors of opportunity and strengthen their financial futures,” Julian Castro, Housing and Urban Development secretary, said in a statement.
Obama said in his speech Thursday that a recovering housing market was an important sign the economy was strengthening. Phoenix was one of the hardest hit cities during the housing crisis, in which home prices plunged and foreclosures skyrocketed. The metro area is now regaining its footing several years later.
“I came here to lay out plans to get responsible home owners back on their feet,” Obama said in his speech.
The FHA's move comes after several calls from associations and industry trade groups – including NAR – as well as members of Congress urged the agency to lower its insurance premiums, which were increasingly being blamed for sidelining thousands of would-be buyers.
"We are optimistic that more affordable FHA loans will have a positive impact on first-time buyers who have been entering the market at a lower-than-normal rate," NAR President Chris Polychron said in a statement. "NAR is a strong supporter of the FHA and its vital role in the mortgage marketplace for home buyers. We will continue our work with the administration to help make the dream of home ownership a reality for millions more Americans."