Now that regulators have fixed the worst abuses of the 2008 credit crisis, it’s time to start promoting homeownership again, according to the top U.S. housing official.
The Department of Housing and Urban Development will do its part, spending this year focusing on ways to help more Americans buy homes, HUD Secretary Julian Castro said today in a Washington speech outlining the agency’s priorities.
“Some have been surprised by this focus,” Castro said at the National Press Club. “A few have even suggested that this is a return to the mania that fueled the crisis. It’s not. Our nation is smart enough to heed the lessons of the past without forsaking our future. The answer isn’t to deny responsible Americans homeownership — it’s to do it right.”
As a first step, Castro and President Barack Obama last week announced a cut in the premiums charged by the Federal Housing Administration as a way to expand homeownership among lower-income borrowers.
The annual fees the Federal Housing Administration charges to guarantee mortgages will be cut by 0.5 percentage point, to 0.85 percent of the loan balance. Under the new premium structure, FHA estimates that 2 million borrowers will be able to save an average of $900 annually over the next three years if they purchase or refinance homes.
The move reverses years of increases in FHA premiums to offset losses caused by defaults on mortgages it backed after the housing bubble burst. Housing industry participants said the increases in annual fees squeezed buyers with modest incomes out of the market.
Republicans criticized the premium cut because the FHA’s insurance fund is still below minimum required levels. The FHA is required to keep enough on hand to cover all projected losses in its portfolio, plus a 2 percent cushion, a level it isn’t projected to reach until fiscal 2016.
No further reductions are currently on the table, Castro said today.