One Simple Reform Could Save U.S. Homeowners Billions

Homeownership has become increasingly unaffordable to working families in recent years, a trend worsened by the coronavirus pandemic. There’s a way the government can ease some of that burden, particularly for first-time buyers, who are disproportionately minorities: Do what’s needed to reduce the unnecessarily high cost of mortgage insurance.

For homeowners who can’t afford big down payments, mortgage insurance has become a fact of life. Fannie Mae and Freddie Mac, the government-sponsored enterprises that guarantee about one of every two new home mortgages, are required by law to have some kind of credit enhancement on loans that exceed 80% of the purchase price. This is almost always obtained from a specialized mortgage insurer. About one in five of their mortgages have it.