About an hour after President Donald Trump was sworn into office, he increased taxes on a million home buyers by suspending a scheduled reduction in mortgage insurance premiums — effectively raising costs indefinitely for middle-class borrowers.
The move by the Department of Housing and Urban Development — one of the first acts of Trump’s administration — reversed a policy announced in the final days of the Obama presidency that would have trimmed insurance premiums for typical borrowers by about $500 a year and boosted stock prices for private mortgage insurance companies.
"Donald Trump promised he would govern for the people, instead of the political elite but one of his first actions after giving his inaugural address, he handed Wall Street a gift at the expense of ordinary people," said New Jersey Democrat Lisa McCormick. "Americans need to judge the actions of this president because we cannot trust his words. Trump just increased taxes on a million middle-class homebuyers."
“This decision effectively takes $500 out of the pocketbooks of middle-class families that are planning to buy a home in 2017," said McCormick. "This is not the way to build a strong economy or take power away from the establishment and give to it the people.”
The rate cut was supposed to go into effect on January 27, and had been lauded as an opportunity to make homeownership more accessible to an estimated one million first-time and low-to-middle-income borrowers..
Former Housing and Urban Development Secretary Julián Castro said the Federal Housing Administration could pass along some modest savings to working families because the agency had sufficient reserves on hand to meet future claims following four straight years of growth.
"President Trump campaigned as the candidate who would stand with the forgotten American worker, but of all of the actions he could have taken on his first day in office, it's telling that his administration has moved to instead make it more expensive for Americans to buy a home this year and beyond," said Sarah Edelman, director of housing policy at the Center for American Progress. "With mortgage interest rates already on the rise, reversing the FHA's move to cut insurance premiums in fact puts the dream of homeownership farther out of reach for millions of hardworking Americans."
The mortgage-fee cut under a government program that’s popular with first-time home buyers and low-income borrowers was one of President Barack Obama’s last-minute economic-policy actions. Republicans have argued in the past that reductions put taxpayers at risk by lowering the funds the FHA has to deal with mortgage defaults.
Shares of private mortgage insurance companies, including MGIC Investment Corp. and Radian Group Inc., erased earlier losses, trading up about one percent as of mid-afternoon. They closed little changed from the day before. Private insurers, which back loans guaranteed by mortgage-finance companies Fannie Mae and Freddie Mac, compete with the FHA for market share and have been critics of fee cuts in the past.
A letter Friday from HUD to lenders and others in the real-estate industry said, “more analysis and research are deemed necessary to assess future adjustments while also considering potential market conditions in an ever-changing global economy that could impact our efforts.”
Senate Democratic leader Chuck Schumer of New York took to the chamber’s floor to denounce the reversal.
“It took only an hour after his positive words on the inaugural platform for his actions to ring hollow,” Schumer said. “One hour after talking about helping working people and ending the cabal in Washington that hurts people, he signs a regulation that makes it more expensive for new homeowners to buy mortgages.”
“This action is completely out of alignment with President Trump’s words about having the government work for the people,” said John Taylor, president of the National Community Reinvestment Coalition, through a spokesman. “Exactly how does raising the cost of buying a home help average people?”