The Trump administration, in its first hour, rescinded a scheduled decrease in FHA insurance rates that benefit lower-income and middle-class homeowners. This will be a $488 bite (average) to 12 million homeowners. www.latimes.com/...
The FHA guaranteed 1,258,000 mortgages in 2016. The average home cost $195,068. The FHA rate was scheduled to drop 0.25%. With this act, the average cost to a homeowner PER YEAR will be $488. The average length of time a homeowner pays mortgage insurance is 11 years, so approximately 12 million homeowners will be impacted. The total impact is about $5,400 over the 11 years for someone who got FHA mortgage insurance in 2016. Only homes under $660,000 are eligible, so this impacts mainly lower-income and middle-class borrowers who are not able to pull together a 20% down-payment for a home. portal.hud.gov/...
What does this mean? The average household is 2.6 persons, so this impacts 31.2 million people, 10% of the US population of 324 million. For these households their house will cost an extra 2.5%. Or, one could think of it as equivalent to a 23% increase in property taxes. Or, as equivalent to a 1.4% tax hike on a household with the median US income $55,775. (They pay 31.5% tax + social security plus an average of $2,127 property tax on their home.) This is not insignificant!
This will bring in an additional $5.9 billion per year, to an agency that says it has met it’s statutory capital requirement. In 2013 there was a shortfall, but the finances of the FHA are strong now. This reversal is the new fiscal policy of Ben Carson and President Trump. Not good for the average American. Harbinger of the future?