PRESIDENT ANNOUNCES CUT IN HOME MORTGAGE INSURANCE
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.
TO REDUCE HOMEOWNERSHIP COSTS FOR
600,000 FAMILIES EACH YEAR
AND HELP BOOST
HOMEOWNERSHIP RATE TO RECORD LEVEL
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
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