“Oops! … I did it again” is a Britney Spears song, but it could also double as the federal government’s motto for housing policy.
Starting in late March, the Federal Housing Administration will reduce mortgage insurance payments on loans that it backs. The agency insures mortgages for borrowers with suboptimal — not good — credit. Some mortgages require as little as 3.5% down. Borrowers have to pay an extra 1.75% fee, which can be rolled into the mortgage. Borrowers also have to pay for mortgage insurance, which is an annual premium of 0.85% in many cases. The Biden administration will now drop that to 0.55%. On a $400,000 home, the average annual savings is $1,200.
The appeal of this move is obvious. A rapid increase in mortgage rates has dramatically reduced the pool of available buyers — at least at these prices. The White House is looking to juice the market.
