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HUD Archives: News Releases

HUD No. 97-90
Further Information:For Release
In the Washington, DC area: 202/708-1420Thursday
Or contact your local HUD officeJune 12, 1997


WASHINGTON -- President Clinton announced that the Department of Housing and Urban Development cut its home mortgage insurance premium today to save as many as 600,000 first-time homebuyers hundreds of dollars each in closing costs every year.

The 12.5 percent cut in the Federal Housing Administration up-front mortgage insurance premium for first-time homebuyers is part of President Clinton's National Homeownership Strategy, which is designed to boost homeownership to record levels.

Because of the premium reduction, up to 50,000 families who would otherwise be unable to afford a home will be able to become first-time homeowners each year, HUD Secretary Andrew Cuomo said.

Today's reduction cuts the FHA premium for first-time homebuyers from 2 percent of the value of an FHA-insured loan to 1.75 percent. Cost-saving management improvements at the FHA -- which is part of HUD -- will allow the FHA to reduce its mortgage insurance premiums, Cuomo said.

Cuomo said the FHA premium reduction is the third President Clinton has approved since he took office in 1993. The three reductions, along with savings passed on to homebuyers because of increased efficiency in the FHA, will save homebuyers $1,200 in closing costs on the average FHA mortgage of $85,000. The reduction made today accounts for $200 of that average savings.

The savings to homebuyers exceeds the $1,000 goal for cuts in mortgage closing costs that was set by the President.

"High closing costs are a barrier to the American Dream of homeownership for many families," Cuomo said. "By lowering the barrier, we transform the dream of homeownership into a reality for more hard-working families. Increased homeownership promotes strong families, community stability, neighborhood vitality, and economic growth in communities across the nation."

To qualify for the premium reduction, prospective first-time homeowners must successfully complete the Homebuyer Education and Learning Program, a 16-hour course that covers such topics as how to select the right house and mortgage, household budgeting, managing credit, and home maintenance and repair.

FHA statistics show that new homeowners who complete homebuyer counseling programs are better prepared for homeownership and therefore less likely to default on their mortgage payments.

President Clinton launched the National Homeownership Strategy in 1995 to bring all levels of government, the housing industry, lenders and non-profit groups together to increase the national homeownership rate to an all-time high of 67.5 percent, and enable 8 million more families to become homeowners by the year 2000. Sixty-three national groups joined HUD to form the National Partners in Homeownership.

Over the last two years the strategy has helped create 2.5 million new homeowners, while the nation's homeownership rate has grown to 65.4 percent -- the highest rate since 1980. Currently a record 66.3 million American families are homeowners.

In addition to regular home mortgage insurance, mortgages insured under Sections 203(h) (Mortgage Insurance for DisasterVictims), 203(I) (Mortgage Insurance for Outlying Areas), 203(n) (Single Family Cooperative Mortgage Program), 245(a) (Graduated Mortgage Payments and Growing Equity Mortgages - except on condominiums), and 251 (Adjustable Rate Mortgages) of the National Housing Act are also eligible for the reduced up-front mortgage insurance premium.

Content Archived: January 20, 2009

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