The U.S. Department of Housing and Urban Development (HUD), through the Federal Housing Administration (FHA), reduced the annual mortgage insurance premiums charged to homebuyers for mortgage insurance, a monthly fee homeowners with FHA-insured mortgages pay to insure their mortgages on top of their monthly principal and interest payments.

The reduction in the annual mortgage insurance premium will be 0.3 percentage points, from 0.85 percent to 0.55 percent, the White House stated in its brief. This will save around $800 for homeowners and is part of the Biden-Harris administration’s efforts to address the affordable housing crisis.

“FHA’s announcement strikes an appropriate balance between assisting homeowners and ensuring the capital reserve ratio and insurance fund remain strong,” National Association of Realtors (NAR) President Kenny Parcell said. “NAR has continuously advocated for responsibly reducing mortgage insurance premiums to help qualified homebuyers struggling with affordability in the current environment, and we applaud the administration for this action.

“Mortgage rates have doubled over the past year, and home prices have increased more than 30 percent in some counties,” he continued. “In this competitive market, new and low- to moderate-income buyers are often left behind. This reduction will help alleviate some of the financial stress those potential buyers encounter when purchasing a home and allow more people across the country to achieve the American Dream of homeownership.”

Mortgage Bankers Association President and CEO Bob Broeksmit also gave kudos to HUD Secretary Marcia Fudge and FHA Commissioner Julia Gordon for the adjustment.

“The lower premiums will expand homeownership opportunities by lowering mortgage payments for qualified FHA borrowers, providing critical relief from the steep rise in mortgage rates and home prices just in time for the spring buying season,” Broeksmit said. “This will especially help minority homebuyers and low-and moderate-income households who are predominantly served by FHA loans.

“The Mutual Mortgage Insurance Fund is strong, with low delinquencies and a capital reserve ratio several times above the statutory minimum,” he added. “Ensuring a robust FHA program that protects taxpayers and offers affordable homeownership opportunities for families in underserved communities is important, and we will work with the Biden administration and Congress on policies that have the greatest impact on borrower affordability and sustainability.”

Sen. Sherrod Brown (D-Ohio), chairman of the Senate Committee on Banking, Housing, and Urban Affairs, also commented on the adjustment.

“Homeownership is out of reach for too many Ohioans and families across the country,” Brown said. “By cutting the monthly cost of a mortgage for many first-time and lower-income buyers, the administration is making the dream of sustainable homeownership available for more working families.”