The U.S. Department of Housing and Urban Development has withdrawn a planned 71% hike in the mortgage insurance premiums on most multifamily and healthcare loans backed by the Federal Housing Administration. Originally slated to take effect Oct. 1, the increase would have effectively reduced borrowers’ leverage on loans by increasing their cost of funds.
FHA mortgage insurance guarantees the federal government will cover losses in the event of a default. Borrowers buy the insurance to achieve lower interest rates on multifamily loans, and experts say the programs are a key ingredient in the creation of affordable rental housing.
FHA Commissioner Brian Montgomery informed the Mortgage Bankers Association on Sept. 22 that the multifamily mortgage insurance premiums (MIPs) would remain at current levels until further notice. HUD will publish a notice to that effect in the Federal Register, according to the MBA.
This summer, House and Senate appropriations committees advised HUD to research potential adverse effects of increased MIPs and report back to Congress before adopting new rules. The House committee noted higher fees would raise housing costs, concluding that “imposing further constraints on FHA rental housing development makes little sense.”
Despite that direction, HUD announced on June 28 its intention to raise premiums, opening a one-month public comment period that ended July 28. Approximately 360 comments were received by the comment due date, and the comments — including a letter signed by 121 members of the U.S. House of Representatives and one signed by 26 United States Senators — were overwhelmingly opposed to the MIP increases.
“MBA led the opposition to the increase so we are thrilled with this outcome and believe this result is in the best interest of all those concerned — consumers, industry and FHA," says Kurt Pfotenhauer, MBA’s senior vice president of government affairs. “Our members were in near constant discussions with lawmakers and HUD about the harm that the proposed increase would have caused to affordable housing and the FHA multifamily market. We're thankful that HUD recognized this and rescinded the rule."