One Year In: U.S. Department of Housing and Urban Development Annual Mortgage Insurance Premium Cut Saves Borrowers $600 Million

By klrw460 March 20, 2024

The U.S. Department of Housing and Urban Development (HUD) commemorated the first anniversary of its implementation of a significant reduction in the Annual Mortgage Insurance Premium (MIP) for borrowers with Federal Housing Administration (FHA)-insured mortgages. This 35 percent reduction, effective from March 20, 2023, applies to all borrowers utilizing FHA-insured financing for home purchases or refinancing. This initiative is a key part of the Biden-Harris Administration’s strategy to enhance homeownership accessibility and affordability for working families across the nation, with a particular focus on supporting households of color, who are served by the FHA at disproportionately high rates.

In its first year, this reduction in the MIP has facilitated considerable savings for borrowers, assisting over 682,000 individuals in saving an average of $876 per year. This collective saving approximates nearly $600 million in mortgage payments in the first year alone.

HUD Secretary Marcia L. Fudge lauded the MIP cut as a significant achievement of her tenure, highlighting its substantial impact on FHA borrowers, including numerous first-time homebuyers and households of color. Federal Housing Commissioner Julia Gordon remarked on the timeliness of this reduction amidst rising homebuying costs, noting its role in easing financial pressures for American homebuyers. The decision for this reduction was supported by the strong performance of the Mutual Mortgage Insurance Fund in fiscal year 2022 and careful risk assessment.

The FHA’s mortgage insurance is designed to make mortgage financing more accessible to low- and moderate-income families by protecting lenders against losses from loan defaults. This insurance, financed by premiums paid by borrowers, enables the FHA program to operate without direct government subsidies. The annual MIP, a percentage of the loan balance, is a critical factor in mortgage affordability and, thus, in determining borrowers’ eligibility for FHA-insured loans. The reduction of the MIP expands homeownership opportunities by allowing more potential buyers to qualify for financing.

For the full details and insights, please refer to the original press release at the following link: https://www.hud.gov/press/press_releases_media_advisories/HUD_No_24_058