| HUD No. 00-310 | |
| Further Information: | For Release |
| In the Washington, DC area: 202/708-0685 | Monday |
| Or contact your local HUD office | October 30, 2000 |
CUOMO SAYS FHA WILL CUT THE COST OF MORTGAGE INSURANCE
SAN FRANCISCO – U.S. Housing and Urban Development Secretary Andrew Cuomo today released the details of a plan that will save more than one million homeowners with Federal Housing Administration-insured mortgages in excess of $1 billion annually in insurance costs.
Cuomo said that the FHA’s Homebuyer Savings Plan will reduce up-front insurance premiums by one-third, eliminate annual premiums after a homeowner has built 22 percent equity in the home, and pay premium refunds to current FHA borrowers. Cuomo made the announcement to an estimated 6,000 attendees of the 87th Annual Mortgage Bankers Association Convention in San Francisco.
"After four years of reforming FHA, today we are putting the fruits of our success to work for American families," Cuomo said. "The Homebuyer Savings Plan will lower the cost of homeownership and help families take a giant step toward sharing in the American dream."
The Homebuyer Savings Plan will reduce the premium requirement from 2.25 percent to 1.5 percent of the original loan amount. As a result, a family with a typical $100,000 FHA-backed mortgage will save $750; for larger mortgages the initial savings may be as much as $1,650.
Cuomo also announced that the Plan will eliminate entirely FHA’s annual premium of .5 percent (or 50 basis points) on all loans once homeowners build 22 percent equity in their home. Modeled after private mortgage insurance (PMI) cancellation legislation passed by Congress in 1998, this premium reform will further reduce the cost of FHA mortgage insurance. Unlike the PMI legislation, however, FHA will continue to enhance consumer protection by insuring the mortgage even after the annual premium payments are eliminated.
These two parts of the plan will save the typical FHA consumer an average of $1,500 over the life of a $100,000 loan.
Under the third part of the Plan, current FHA borrowers will receive a refund on premiums paid when they sell their home or refinance their loan. Approximately 200,000 borrowers will be eligible for this refund in the first year.
Earlier this year, the accounting firm of Deloitte & Touche concluded that the FHA’s Mutual Mortgage Insurance Fund held its strongest financial position since it was created in 1934, with a record economic value of $16.6 billion. They also found the FHA insurance fund made an extraordinary recovery from just a decade ago when it had a negative economic value of $2.7 billion.
"We will not spend one penny of FHA’s
$16 billion in reserves to pay for this premium cut," Cuomo said.
"After implementing the Plan we estimate that the economic value of
FHA’s insurance fund will grow to $34 billion by 2006."
Last week, President Clinton and Cuomo announced that the percent of Americans
who own their own home hit a record high 67.7 percent in the third quarter
of 2000, shattering the Clinton Administration’s target of 67.5 percent
set in 1995. There are now 71.6 million U.S. homeowners. In addition to
the historic national homeownership rate, all-time high rates were set for
minorities (48.2 percent), Hispanics (46.7 percent), central city residents
(51.9 percent), households headed by females (53.3 percent), households
earning less than the median family income for the quarter (52.2 percent),
and married couples younger than 35 (61.0 percent).
"Last week we reached a record 67.7 percent homeownership rate in American," Cuomo said, "But we cannot rest until we erase the gap in minority homeownership. With FHA’s Homebuyer Savings Plan, we are lowering the cost of buying a home, and fueling further growth in homeownership." More than 80 percent of all FHA loans go to first-time homebuyers, and more than 40 percent to minority households. Last year, FHA insured nearly 1.3 million home loans with a combined value of approximately $125 billion.
The FHA, an agency within HUD, is entirely financially self-sufficient, with revenues from insurance premiums and sales of property paying the cost of all insurance claims and operations.
Since its inception, FHA has helped 30 million families realize the dream of homeownership. Because FHA mortgage insurance protects lenders from losses, many more families who would otherwise not qualify for private mortgage insurance are able to qualify for a home loan.
Since being named Secretary in 1997, Cuomo has implemented a number of reforms at FHA including: reorganizing and consolidating 81 field offices into four state-of-the-art homeownership centers; adopting automated underwriting systems that reduce the time to process an FHA application from six weeks to two days; implementing a separate Homebuyer Protection Plan, a complete reform of FHA’s appraisal process that includes a number of cutting-edge consumer protections; and implementing a new foreclosure avoidance program that helped more than 35,000 borrowers in default avoid foreclosure last year.
FHA-insured loans also benefit homebuyers
in these ways:
- FHA downpayments of three percent are lower
than the minimum that many lenders require for non-FHA mortgages. Higher
downpayments are a major roadblock to homeownership.
- FHA’s requirement for homebuyer credit
ratings are more flexible than those set by many lenders for non-FHA borrowers.
- FHA permits homebuyers to use gifts from
family members and non-profit groups to make their entire downpayment,
while conventional loans generally require homebuyers to come up with a
portion of the downpayment from their own funds.
- FHA permits a borrower to carry more debt than a private mortgage insurer typically allows.
FHA Single Family Mortgage Insurance
FHA Insured Mortgages in the Top 50 Markets
Five-Year Projection
METROPOLITAN STATISTICAL AREA FIVE-YEAR PROJECTION
Number Mortgage Amt.
| CHICAGO, IL | 241,495 | $27,089 |
| LOS ANGELES-LONG BEACH, CA | 260,428 | $33,905 |
| WASHINGTON, DC-MD-VA-WV | 236,120 | $27,647 |
| ATLANTA, GA | 155,210 | $14,772 |
| DALLAS-FT WORTH-ARLINGTON, TX | 167,753 | $13,560 |
| PHOENIX-MESA, AZ | 155,225 | $13,473 |
| DENVER, CO | 141,768 | $15,423 |
| DETROIT, MI | 116,290 | $9,894 |
| PHILADELPHIA, PA-NJ | 115,308 | $10,071 |
| BALTIMORE, MD | 144,693 | $15,077 |
| MIAMI & FORT LAUDERDALE, FL | 106,173 | $8,859 |
| HOUSTON, TX | 69,420 | $5,119 |
| MINNEAPOLIS-ST PAUL, MN-WI | 89,215 | $8,558 |
| ORLANDO & DAYTONA BEACH, FL | 71,660 | $5,577 |
| INDIANAPOLIS, IN | 67,320 | $5,911 |
| TAMPA-ST.PETERS-CLEARWATER,FL | 57,945 | $4,049 |
| SEATTLE-BELLEVUE-EVERETT & TACOMA, WA | 63,053 | $7,712 |
| NEW YORK, NY | 53,415 | $8,958 |
| ST LOUIS, MO | 74,055 | $5,614 |
| SACRAMENTO, CA | 77,128 | $8,525 |
| COLUMBUS, OH | 50,995 | $4,833 |
| SALT LAKE CITY-OGDEN,UT | 57,980 | $6,220 |
| SAN DIEGO, CA | 57,270 | $7,268 |
| NORFOLK-VA.BEACH-NEWPORT NEWS,VA-NC | 56,760 | $4,882 |
| MEMPHIS, TN-AR-MS | 54,178 | $4,511 |
| NASHVILLE, TN | 48,753 | $4,624 |
| CHARLOTTE-GASTONIA-ROCK HILLS, NC-SC | 36,308 | $3,469 |
| KANSAS CITY, MO-KS | 52,445 | $4,079 |
| PORTLAND-VANCOUVER, OR-WA | 33,198 | $3,860 |
| SAN ANTONIO, TX | 43,013 | $3,114 |
| HARTFORD, CT & NEW HAVEN-MERIDEN, CT | 37,583 | $3,604 |
| CLEVELAND-LORAIN-ELYRIA, OH | 38,475 | $3,356 |
| CINCINNATI, OH-KY-IN | 35,845 | $3,084 |
| RALEIGH-DURHAM, NC | 32,573 | $3,418 |
| OKLAHOMA CITY, OK | 35,278 | $2,225 |
| SAN FRANCISCO & SAN JOSE & OAKLAND, CA | 41,363 | $5,339 |
| NEW ORLEANS, LA | 32,513 | $2,433 |
| PITTSBURGH, PA | 27,550 | $1,825 |
| PROVIDENCE-FALL RIVER-WARWICK,RI-MA | 23,665 | $2,342 |
| LOUISVILLE, KY-IN | 22,685 | $1,811 |
| ALBUQUERQUE, NM | 23,600 | $2,279 |
| BOSTON, MA-NH-ME-CT | 25,358 | $3,347 |
| GRAND RAPIDS-MUSKEGON-HOLLAND,MI | 22,870 | $1,690 |
| BIRMINGHAM, AL | 23,035 | $1,748 |
| GREENSBORO-WINSTON SALEM-HIGH PT,NC | 21,020 | $1,757 |
| W PALM BCH-BOCA RAT, FL | 22,718 | $1,821 |
| BUFFALO-NIAGR FALLS, NY | 17,960 | $1,233 |
| GREENVILLE-SPARTANBURG-ANDERSON,SC & ASHVILLE, NC | 7,898 | $629 |
| MILWAUKEE-WAUKESHA, WI | 8,970 | $732 |
| HARRISBURG-LEBANON-CARLISLE,PA | 8,543 | $725 |
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