Community Home Lenders Call for FHA Premium Reduction
. . . Excessive FHA revenue flow hurts borrowers
The Community Home Lenders Association (CHLA) today called for a reduction in the insurance premium the Federal Housing Administration (FHA) charges home buyers.
CHLA noted that in FY 2014 the FHA is projected to net nearly $13 billion or 7.25% on every new loan. The CHLA proposal would reduce the annual premium from the current 1.35% to .75% and to .5% for those borrowers who successfully complete a HUD approved pre purchase counseling program. To partially offset the revenue reduction resulting from the decrease in the annual premium, CHLA suggested FHA increase the upfront premium from its current 2% to as much as 3%. CHLA also proposed that as FHA’s financial status improved to meet the 2% reserve requirement that the annual premium be reduced to .5% for all borrowers.
In a letter to OMB Director Sylvia Matthews Burwell, Scott Olson, Executive Director of CHLA made the case on behalf of borrowers that current premiums were too high. “We are concerned that FHA’s excessive levels of premium –particularly the 1.35% amount charged annually on a loan –risks making home purchase for many homebuyers unaffordable.”
Olson also noted that increasing the upfront premium while reducing the annual premium would shorten the timeframe required for FHA to achieve the statutory goal of maintaining a 2% reserve in the fund.
“We fully understand the need for the fund to be on firm financial footing,” said Olson. “However, we believe that goal can and should be achieved in a balanced approach that is true to FHA’s core mission of helping first time and moderate income purchasers.”
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