WASHINGTON ― With what may have been his first presidential order, Donald Trump made it more expensive for working- and middle-class Americans to buy their first homes. The move will increase costs for 750,000 to 850,000 Americans in the next year alone, according to the National Association of Realtors.
The Obama administration had said last week that the Federal Housing Administration would drop the cost of mortgage insurance it sells by almost a third to 0.60 percent. But after Trump took office, the Department of Housing and Urban Development, which oversees the FHA, told lenders the fee cut was off. The reversal of the reduction will mean that homebuyers who borrow $200,000 under the program will see their mortgage insurance fees go up by $500 a year relative to what the Obama administration had ordered, according to figures released by the FHA when the cut was announced.
The reduction was intended to help partially offset the cost of rising mortgage rates and was scheduled to go into effect on Jan. 27. The government sells the insurance in case borrowers default.
The mortgage industry’s main lobby group said when the cut was announced that it looked forward to working with the new administration on the issue. Congressional Republicans attacked the move, saying it would cut into the reserves the FHA held against defaults.
Julian Castro, Obama’s HUD secretary, said when the fee cut was announced that the FHA’s reserve fund had grown by $44 billion in the last four years and that it was time to share these gains with borrowers. Ben Carson, Trump’s nominee to run HUD, said in his confirmation hearing that he supported undoing the fee cut, and lending trade publications reported that a reversal was likely.
“We’re disappointed in the decision but will continue making the case to reinstate the cut in the months ahead,” Bill Brown, the president of the National Association of Realtors, said in a statement to The Huffington Post.
A spokesman for the National Association of Home Builders told HuffPost that it opposes canceling the reduction and it “will work with the Trump team” on the issue. “We feel confident that they will reinstate the reduction,” the spokesman said.