One Hour After Taking Office, Trump Suspends FHA Mortgage Fee Cut
by Tyler Durden
ZeroHedge.com
Jan 21, 2017
In a move that has sparked controversy among some economists, within an hour of being sworn in, Trump undid one of Barack Obama’s last-minute actions, a mortgage-fee cut under a government program catering to first-time home buyers and low-income borrowers. The cut, which would become effective on January 27, would have reduced the annual premium for someone borrowing $200,000 by $500 in the first year, however exposing taxpayers to further losses in case of a spike in defaults.
Last week, as part of a scramble of 11th hour actions by the outgoing president, Obama’s Housing and Urban Development secretary, Julian Castro, said the FHA would cut its fees. In addition to the morgage-fee cut, in the last days of Obama’s administration, the White House announced new Russia sanctions, a ban on drilling in parts of the Arctic and many other regulations. The administration didn’t consult Trump’s team before any of these announcements.
While nominal, Republicans have argued that fee reductions put taxpayers at risk by lowering the funds the FHA has to deal with mortgage defaults even though the net impact of such a fee cut is negligible in the grand scheme of things, once the next housing downturn arrives and the FHA is in need of another bailout.
As a result, in addition to his first executive order on Friday night to “ease the burden of Obamacare’, the new administration on Friday said it’s canceling this last minute reduction in the Federal Housing Administration’s annual fee for most borrowers, which had not been implemented yet. A letter Friday from HUD to lenders and others in the real-estate industry said, “more analysis and research are deemed necessary to assess future adjustments while also considering potential market conditions in an ever-changing global economy that could impact our efforts.”
The reversal was to be expected: at his confirmation hearing last week, Ben Carson, Trump’s nominee to lead HUD, FHA’s parent agency, said was disappointed the cut was announced in Obama’s final days in office. On January 9, House Financial Services Committee Chairman Jeb Hensarling stated Obama ‘Parting Gift’ Puts Taxpayers at Risk of Another FHA Bailout.
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