Joe Raedle/Getty Images

Joe Raedle/Getty Images

The Trump administration has suspended a cut in fees on FHA-insured mortgages that had been set to take effect this month.

A reduction in the Federal Housing Administration’s annual mortgage insurance premium had been scheduled to take place Jan. 27. In one of the first acts of the Trump administration, the cut in premiums has been suspended indefinitely.

SEARCH RATES: Start out right by shopping today for a mortgage.

Not a total surprise

Ben Carson, the housing secretary nominee, had hinted at this move last week, during his confirmation hearing. He said that the Obama administration’s announcement of the premium cut had been “done on the way out the door” and that the cut would cost $5 billion next fiscal year. “That’s not chump change,” he said, “so certainly, if confirmed I’m going to work with the FHA administrator and other financial experts to really examine that policy.”

For most borrowers buying homes with down payments of less than 5 percent, the monthly mortgage insurance payments will remain $141.67 for a $200,000 loan. It would have fallen to $100 a month.

Check out Bankrate’s mortgage calculator.

The fiscal picture

The FHA is required to have a capital reserve ratio of at least 2 percent. At the end of the last fiscal year, that ratio was 2.32 percent. On Jan. 9, the Obama administration said it would cut FHA premiums because of the mortgage insurance fund’s financial health. That came as a surprise, because just a few months before, administration officials had said that they weren’t planning to reduce FHA fees.

With the fees now remaining unchanged, the FHA’s capital reserves will presumably continue to build.

“We recognize the administration’s need to examine the overall health of the insurance program and weigh that against the benefits of lowering mortgage insurance premiums,” says David H. Stevens, president of the Mortgage Bankers Association. “Given that lenders have already started preparing for the MIP decrease, it is important that any new policy be implemented in a way that minimizes disruption for borrowers and lenders.”

SEARCH RATES: Know how much you can comfortably borrow? Now find a great mortgage deal.

Promoted Stories