Just minutes after Donald Trump took the oath offfice Friday, his administration overturned a mortgage-fee cut under a government program that’s popular with first-time home buyers and low-income borrowers.
The Department of Housing and Urban Development on Friday said the agency is canceling a reduction announced last week while President Barack Obama was still in office. The Federal Housing Administration had planned to cut its annual fee for most borrowers by a quarter of a percentage point to 0.60 percent, effective on Jan. 27.
Republicans have argued in the past that reductions put taxpayers at risk by lowering the funds the FHA has to deal with mortgage defaults. A letter from HUD to lenders and others in the real estate industry, sent after Donald Trump assumed the presidency on Friday, didn’t give an explanation of the decision. HUD spokesman Brian Sullivan said the agency would issue a statement soon.
Ben Carson, Trump’s nominee to lead HUD, FHA’s parent agency, said at his confirmation hearing last week that he wasn’t consulted before the fee reduction and was disappointed it was announced in Obama’s final days in office.
The FHA sells insurance to protect against defaults and doesn’t issue mortgages. It is a popular loan program among first-time home buyers because it allows borrowers to make a down payment of as low as 3.5 percent with a credit score of 580, on a scale of 300 to 850.
The cut would have reduced the annual premium for someone borrowing $200,000 by $500 in the first year. Some housing industry groups lauded the change, saying it could increase home buying by offsetting recent rises in mortgage rates.