The former life-of-the-loan policy was accused of hurting FHA financial performance.
The House Financial Services Committee passed a bill that would limit mortgage insurance payments (MIP) on loans backed by the Federal Housing Administration. The bill – H.R. 3141, “The FHA Loan Affordability Act of 2019” – would repeal FHA’s policy that requires borrowers to pay MIP for the life of the loan. Instead, payments would cease when the outstanding loan balance reaches 78% of the home’s original value. The Community Home Lenders Association expressed its support for the bill, calling the FHA’s current policy discriminatory against borrowers. “The FHA Life of Loan policy is unfair to FHA borrowers because it significantly overcharges them,” the CHLA wrote, estimating the additional cost to be $15,000. “This is a significant impediment to asset building, and results in total premiums that are wildly disproportionate to the risk a loan poses to FHA,” the group stated, adding that the policy is hurting the FHA’s financial performance.
Source: HousingWire