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Tuesday, January 10, 2017

FHA to Cut Mortgage Insurance Premiums Again

For the second straight year, the Department of Housing and Urban Development will cut the mortgage insurance premiums paid by borrowers with new Federal Housing Administration-insured mortgages and refinances. In announcing the 25 basis point reduction yesterday, HUD Secretary Julian Castro projected that it would save borrowers an average of $500 per year.

Under the plan, the insurance premium for FHA-backed loans would fall to 0.55 percent for loans with terms longer than 15 years and loan-to-value ratios of 95 percent or less. The cut -- criticized as irresponsible by many Republicans on Capitol Hill -- takes effect for loans that close on or after Jan. 27.

The FHA’s Mutual Mortgage Insurance Fund reached a capital ratio of 2.32 percent in 2016, the second consecutive year since the housing crisis that its reserve ratio has exceeded the statutorily required level.

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