WASHINGTON – Jan. 9, 2015 – U.S. Housing and Urban Development (HUD) Secretary Julián Castro officially announced that the Federal Housing Administration (FHA) would reduce the annual premiums new borrowers pay on an FHA loan by a half percent.
Homebuyers cannot yet get the lower FHA rate, however.
The new annual premium prices are expected to take effect towards the end of the month, according to Castro. FHA must first explain the new pricing structure to FHA lenders in a mortgagee letter, which it says it will issue shortly.
Castro says the change is projected to save more than two million FHA homeowners an average of $900 annually and spur 250,000 new homebuyers to purchase their first home over the next three years.
The change reflects the improved economic health of FHA’s Mutual Mortgage Insurance Fund (MMIF). In the wake of the nation’s housing crisis, FHA increased its premium prices to stabilize the health of MMIF. FHA’s recent annual report to Congress showed that the economic condition of the agency’s single-family insurance fund continues to improve, adding $21 billion in value over the past two years.