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Trump Administration Quickly Suspends Mortgage Insurance Rate Cut

The cut was suspended indefinitely. It could have benefited first-time homebuyers or those with poor credit.

By: Lindsay Gloor

Posted at 10:05 PM, Jan 20, 2017

and last updated 2017-01-20 22:05:00-05

Just one hour after President Donald Trump was sworn in, his administration suspended a pending cut to mortgage insurance rates.

The Obama administration set forth the policy last week. It would have affected insurance purchases for loans backed by the Federal Housing Administration.

Those loans are typically used by people with poor credit or by first-time home buyers. More than 1.1 million borrowers were newly insured in 2015.

The FHA estimated the rate reduction — 1/4 of one percentage point — would have saved homeowners using FHA loans an average of $500 this year.

Some Republicans expressed concern about the risk of another FHA bailout should its borrowers default. But rising mortgage interest rates might now be enough to discourage potential home buyers altogether.