Reps. Gregory Meeks (D-N.Y.), a senior member of the House Financial Services Committee, and Pete Sessions (R-Texas) reintroduced H.R. 5508, “The Mortgage Insurance Freedom Act” on Sept. 19.

This bill aims to allow borrowers to stop paying Federal Housing Administration (FHA) mortgage insurance premiums once they have built up a certain amount of equity in their home. Whereas private mortgage insurance premiums are automatically eliminated once the homeowner’s loan-to-value ratio reaches 78 percent, that is not the case for FHA borrowers, who are required to pay mortgage insurance premiums for the entire life of their loan. This ends up disproportionately impacting hardworking families and those striving to achieve the American dream of homeownership, according to the legislators.

“This legislation is designed to help Americans keep more of their hard-earned money while making homeownership more attainable,” Meeks said. “The Mortgage Insurance Freedom Act lowers monthly costs for first-time buyers and young families, helping them build equity faster. By saving FHA borrowers hundreds of dollars annually, it gives families greater financial flexibility to put toward savings, investments and daily needs.”

“The Mortgage Insurance Freedom Act” address[es] a key inequity in the FHA system by eliminating unnecessary mortgage insurance premiums for individuals who have built significant equity,” Sessions added. “This practical bill rewards financial responsibility and delivers meaningful relief to homeowners across the country.”

“The Mortgage Bankers Association (MBA) supports the introduction of the Mortgage Insurance Freedom Act, which would eliminate the [FHA’s] life-of-loan mortgage insurance premium requirement,” Bill Killmer, MBA senior vice president of legislative and political affairs, said. “We believe borrowers with FHA-insured mortgages, who are primarily first-time and low- to moderate-income homebuyers, should have financing options comparable to those with conventional mortgages. Urging [the Department of Housing and Urban Development] to eliminate FHA’s life-of-loan requirement through a data-driven process would be a meaningful step toward making homeownership more affordable and attainable for American families.”         

“Countless homeowners are still paying [private mortgage insurance] each month even though they’ve built enough equity that there’s no real risk of foreclosure,” Brendan McKay, chief advocacy officer of the Broker Action Coalition said. “FHA is holding over 400 percent more in reserves than required, and it’s time to turn off the faucet.”