H.R. 5884 Reduces FHA Mortgage Insurance for Home Buyers?
H.R. 5884 Was introduced to Congress on July 1st, 2012 by Representative Rep. Karen Bass [D-CA33] of California.
The goal of this proposed bill is to make FHA home loan financing more affordable by combatting the many mortgage insurance premium increases that have made FHA less affordable to entry level home buyers.
Dubbed the Homeownership Preservation Education Act of 2012, this program directs the Secretary of Housing and Urban Development (HUD) to create a one year pilot program to evaluate if home ownership counseling as a method for reducing defaults on FHA mortgages.
As an incentive, first time home buyers would be offered a reduced up front mortgage insurance premium in exchange for completing a first time home buyer education class.
Is it Good Enough?
After reading through the full text of H.R. 5884 I am left wondering if there is enough incentive here to accomplish the goal of creating greater first time home buyer affordability.
Here’s what we know about the proposal so far:
- Available for 1-4 family, owner occupied homes
- Available only to first time home buyers (have not owned in 3 years)
- One to one counseling must be completed by approved HUD counselor.
- Up front mortgage insurance would be reduced .25%
While I believe that a .25% decrease in up front mortgage insurance will be an incentive for first time buyers to attend the counseling classes, I do not think this goes far enough to actually stimulate home buying interest with folks currently not in the market to buy a home.
There are fantastic incentives available to help incentivize first time home buyers like down payment assistance programs and home buyer credits.
I think the bigger challenge is the monthly payment – not a small reduction in the upfront insurance premium. The problem with promoting affordability here is that the up front mortgage insurance premium is already financed into the loan. So decreasing it by .25% will do very little if anything at all to improve affordability – it will only reduce the total loan amount by a couple thousand dollars at best.
What first time home buyers need is affordable mortgage payments.
I hope that H.R. 5884 is seriously considered, more because I think that greater consideration does need to be made to make it easier for first time buyers to enter into the real estate market. This version of the bill however, does little to bridge that affordability or confidence gap that is preventing buyers from buying.
If you’re a first time home buyer, there are other ways to decrease or eliminate up front mortgage insurance.
If you’re interested in finding out more about home buyer assistance programs, whether you’re a first time buyer or not, contact us thought the assistance or homebuyer credit applications on the right side of this article, click the green “help” button on the right side of your screen, or ask a question below.
While I appreciate the Government trying to help, the only people that can really help are lenders willing to educate and empower home buyers to take full advantage of the programs available to them today.
714-805-7268
Scott Schang
Manager at Broadview Mortgage Katella in Orange, California, I am passionate about educating and empowering consumers. Feel free to call, text or email me at (714) 805-7268 or ScottS@broadviewmortgage.com
