DAILY REAL ESTATE NEWS | TUESDAY, JULY 01, 2014
The National Association of REALTORS® offered support for the Federal Housing Administration’s efforts to reduce mortgage insurance premiums for first-time buyers through a new housing counseling pilot program, but NAR officials say they’re concerned that the program imposes fees that negate the cost savings on premiums.
FHA announced a four-year pilot program in May called Homeowners Armed with Knowledge (or HAWK), which offers discounts on mortgage insurance premiums to first-time home buyers as long as they complete housing counseling and stay current on their loans.
Did you know that FHA and NAR have been partners for 80 years?
But NAR officials expressed concern over the fees that buyers would have to pay to take part in the pre- and post-counseling, which would range from $300 for pre-contract counseling classes, $100 for pre-closing counseling, and $100 for post-closing counseling. NAR says first-time home buyers may be skeptical of having to pay the fees. Plus, “it could take a home buyer two years to offset the cost of counseling with the premium reductions offered under the HAWK program,” NAR officials wrote in a letter to HUD on Monday.
NAR says the fees to take the counseling could be prohibitive if the housing counseling agency or lender is not able to pay part of the fee to offset the costs.
For home buyers who participate in the HAWK program, they will receive a 50 basis-point reduction in the upfront mortgage insurance premium and a 10 basis-point reduction in the annual premium if they complete housing counseling. If they complete post-closing housing counseling and stay current on their mortgage for at least 18 months after closing, the buyers also will receive an additional 15 basis-point reduction on the annual premium starting in the loan’s 25th month.
On a $180,000 loan, home buyers could see a reduction to their monthly payment by $21 per month or about $9,700 over 30 years, according to HUD’s calculations.
“While any amount helps, many qualified home buyers will still not be able to achieve home ownership,” according to NAR’s letter. Since 2010, mortgage payments have increased $122 per month on a $180,000 FHA-insured loan, mostly attributed to an 80 basis-point rise in the annual premium and a 75 basis-point increase in the upfront premium in the past four years.
“REALTORS® are concerned about FHA’s high annual mortgage insurance premiums and the insurance requirement for the life of the loan,” says NAR President Steve Brown. “FHA fees make up nearly 20 percent of a monthly mortgage payment today and are making it more difficult for qualified buyers to purchase a home. Since FHA is on target to meet and exceed its capital reserve requirements in the next fiscal year, we encourage FHA to support premium reductions across the board.”
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