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The WH hopes this new action makes homeownership more attainable for first-timers
Approximately 850,000 low and middle-income homebuyers would save average of $800 per year thanks to mortgage premium insurance cut, according to the administration.
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FIRST THINGS FIRST
While most millennials and Gen Zers want to own a home either now or in the future and majorities of these generations view homeownership as a top sign of success, many cite affordability as their biggest roadblock.
The White House hopes its latest action on this front will lessen this burden for young adults.
Vice President Kamala Harris and Housing and Urban Development Secretary Marcia Fudge on Wednesday afternoon traveled to Bowie, Maryland to announce that the Federal Housing Administration will reduce its annual mortgage insurance premium from 0.85 percent to 0.55 percent, a decrease of 0.30 percentage points for most new borrowers.
The administration says this action is an important step in making homeownership more attainable and will save approximately 850,000 low and middle-income homebuyers/homeowners an average of $800 per year.
“FHA has tended to be the home for Black and brown borrowers to purchase their first home. So we wanted to continue that culture that we have established there,” Julienne Joseph, senior advisor for homeownership at HUD, said when Supercreator asked why Harris and Fudge held the event at Maryland’s oldest Historically Black College or University.
Joseph added: “But we felt that outside of just making the announcement on the mortgage insurance premium cut that we also wanted to underscore the importance and the value of housing counseling to make sure that we arm all of our borrowers, but particularly those in Black and brown communities, with all of the information that they need before it's time for them to actually get a mortgage.”
The announcement was well-received by Democratic Sen. Sherrod Brown of Ohio, who chairs the Senate Banking Committee, which has jurisdiction over housing.
“Homeownership is out of reach for too many Ohioans and families across the country,” he said in a statement. “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.”
FHA-insured mortgages, which accounted for 7.5 percent of home sales in the third quarter of 2022, are targeted at homebuyers who otherwise may be unable to achieve homeownership.
And although Black and Latino homeownership increased during the pandemic, first-generation homebuyers and first-time homebuyers of color have been particularly affected by the recent nationwide shortfall in the supply of affordable homes and shifting demand for housing.
The premium reduction, which will take effect on March 20 and be reflected in President Biden’s fiscal year 2024 budget, was made possible by accumulated reserves in the FHA’s mortgage insurance fund over the last several years — more than five times the required threshold set by Congress — that have enabled HUD to calibrate premiums more appropriately to the performance of the loans FHA insures.
The administration said the savings that have been passed along to consumers won’t jeopardize the long-term sustainability of the mortgage fund.
The FHA announcement follows the release of an action plan that outlined the administration’s plans to root out racial bias in home valuations.
The White House views its efforts to promote housing stability and affordability as part of the administration’s broader efforts to lower costs for working people on health care, high-speed internet and home energy.
“This work we do, understanding we have to see people in their whole selves and all of the facets that are part of every person that must be seen and addressed, we do this work because we know that when we lower costs for working people, when working people can buy a home, when working people can thrive, our nation thrives,” Harris said during her speech.
Vice President Harris is viewed as a credible messenger inside the administration on this issue given her history as California Attorney General from 2011 to 2017.
While the top lawyer for the largest state in the nation, she created the Mortgage Fraud Strike Force which investigated and prosecuted misconduct at all stages of the mortgage process, according to the Vice President’s office.
Harris also secured a $20 billion settlement from the five largest mortgage servicers accused of contributing to the subprime mortgage crisis and introduced the California Homeowners Bill of Rights, which provided protections to homeowners who are facing foreclosure.
Meanwhile, Joseph said that Secretary Fudge stepped into her role laser-focused on helping the underserved in the communities that there were identifiable barriers that needed to be addressed.
“We have a wonderful surrogate in Secretary Fudge that when she finds an issue, whether it's on the federal level or state or local, she is passionate about doing what she can from the seat that she holds.”
Kenneth Kyrell, an Atlanta-based realtor whose clientele includes first-time homeowners who have been approved and obtained an FHA mortgage, told Supercreator that he is experiencing prospective homeowners who are holding off due to current interest rates.
“It’s definitely a start and I am glad the administration is acknowledging the challenges that many aspiring [and] future homeowners are experiencing today,” he said. “I’m not sure if this plan will change many minds when it comes to homeownership and people feeling as though they will be ‘financially able.’ However, it is a start.”
When Supercreator asked Joseph at HUD about interest rates, which the Federal Reserve could soon increase again soon in its effort to tamp inflation, she told me that the agency has underwriting standards in place to make sure that when evaluating the person for a mortgage, that we don't put them in a situation where they're biting off more than they can chew.
“We have those parameters so we can provide a level of assurance that when we are evaluating a borrower for their ability to repay, we are doing it to ensure that they are not living dollar for dollar what they make.”
In June of 2021, HUD also adjusted how it evaluates borrowers with significant student loan debt so they were not being unnecessarily declined simply because they carried this type of debt, which disproportionately burdens people fresh out of college, those who may not have much generational wealth and individuals who may not have a lot of money in the bank for hard times.
And for borrowers who may not have any derogatory credit just very little of it, HUD also put in place a policy for first-time homebuyers that uses 12 months of positive rental history as sort of a compensating factor for their credit. Under this policy, an application can be reconsidered with positive rental history in mind to help boost borrowers a little bit who may need some assistance in the credit space.
“On an annual basis, more than 80 percent of the mortgages that we insure go to first-time homebuyers. They are literally our client base,” Joseph added. “We want to make sure that when we underwrite them that we give them a little bit of cushion in case something happens so they're not literally taking on more than they can, they can afford it when qualifying for a mortgage.”
There’s also the reality that many times, especially in communities of color, people disqualify themselves before they even submit an application.
“We just assume that this isn’t going to happen,” Joseph said.
That’s where counseling, not just on homeownership but budget and financial literacy, can help homebuyers navigate all the misinformation on homeownership out there — sooner rather than later, Joseph advises.
“I think that it's better of course for borrowers to arm themselves with that knowledge before going into the process as opposed to trying to figure out how to navigate not only the homeownership process but what to do if a hardship happens and they know where to turn and where to get the assistance that they need.”
If his previous two budgets are any indication, President Biden is expected to include a request for significant investments in affordable housing both for renters and homebuyers.
But in a divided Congress with a House Republican Conference determined to cut funding for virtually anything outside of national defense spending and veterans benefits — and Medicare and Social Security if you take their word for it — who knows how much of the president’s proposal will be fulfilled.
Nonetheless, the administration is intentional about viewing housing as a nonpartisan issue.
“People need housing everywhere,” Joseph said. “And the policies we put in place, whether it is positive rental history or for student loan debt, the rising tide floats all boats.”
Joseph added that the administration also understands what it does in one state that might predominantly Black or brown communities will help those states in the midwest populated mostly by white people.
“Everything we’ve tried to do is something that will benefit everyone,” she said. “We just want to make sure that we’re being fair but we also keep racial equity in the back our minds and all the policies that we create.”
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As I mentioned above, Bowie State University is Maryland’s oldest HBCU and one of four in the state. Can you name the other three? (The answer is at the bottom.)
IN THE KNOW
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LAST BUT NOT LEAST
The answer to today’s trivia question: Coppin State University, Morgan State University and University of Maryland Eastern Shore are the three other HBCUs in Maryland, in addition to Bowie State.
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