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CHLA Celebrates One-Year Anniversary of FHA Premium Cut

CHLA Celebrates One-Year Anniversary of FHA Premium Cut

(Washington, D.C.) – On the one-year anniversary of HUD’s announcement of FHA’s action to cut annual premiums on FHA loans by 30 basis points, the Community Home Lenders of America (CHLA) issued the following statement:

“One year later, it is clear that last year’s FHA premium cut is making a difference in the lives of families who want to own a home. Because of last year’s decisive action by FHA Commissioner Gordon, a first-time homebuyer buying a $400,000 home will save $23,660 in FHA premiums over the life of their loan. Moreover, countless first-time homebuyers that would not have qualified for a loan due to Debt-to-Income (DTI) restrictions are now eligible for an FHA loan and have become homeowners.”

To illustrate these points, CHLA is enclosing an excel file showing a prototype first-time homebuyer taking out a $392,755 FHA loan at today’s mortgage rates to buy a $400,000 home. The spreadsheet compares borrower premiums with and without the premium cut.  The analysis shows this prototype borrower will save $23,660, assuming they keep the loan for the full 30-year term. The spread sheet also shows that a homebuyer in a higher cost area – e.g. taking an FHA loan out at the $766,550 GSE conventional loan limit – would save $46,178.

Separately, CHLA is highlighting the details of four actual first-time homebuyers (without identifying them by name), showing that the FHA premium cut announced a year ago was the difference between them qualifying for an FHA loan and not qualifying, due to DTI underwriting restrictions.

In light of these analyses, CHLA comments that:  “In announcing this premium cut last year, the Administration cited the objectives of ‘access to opportunity, home ownership, and wealth building.’ Our CHLA members can affirm through real world examples that these objectives are being fulfilled.”

CHLA was the most active national trade group calling for a premium cut prior to FHA’s action last year, authoring various op-eds and letters, including an IMB sign-on letter calling for an FHA premium cut.