As President Donald Trump sat signing paperwork with congressional leaders Friday afternoon, his administration sprang into a strangely specific action: They made it harder for Americans to afford their own homes. And the change specifically will impact lending to the poor.
Just 11 days after the Department of Housing and Urban Development (HUD) had announced a cut in fee rates for mortgages, Trump’s team revoked the price cut. The small but significant reduction in mortgage insurance premiums had been set to go into effect January 27, but is now “suspended indefinitely,” per an administration letter.
Analysts heralded the fee cut, a policy championed by Democrats, as a significant savings—around $500 per year on a typical loan. It would affect millions of homeowners whose loans are insured through the Federal Housing Administration. It also would have helped prospective home buyers with lower credit scores borrow by bringing the federal version of mortgage insurance down to a more competitive price with private offerings.
Reuters reports that Trump’s team did not offer any explanation of its decision in the letter.
FHA’s premiums have been significantly higher than market rate for years now as the feds fought to clear up a messy balance sheet of loans acquired during the collapse that marked the last presidential transition. The early-January move to slice 25 basis points off the rate was a long time coming. Proponents of the move have argued it was overdue, both because consumers needed the help and because the government’s housing insurance portfolio is now healthy enough to justify lowering rates.
But the announcement had alarmed industry lobbyists and some members of Congress, according to National Mortgage News, prompting the incoming administration to suspend former HUD secretary Julian Castro’s decision.
Whether Trump is moving out of an abundance of caution or a deeper hostility to giving borrowers a break or a desire to restrict access to home loans, at the surface level the decision fits the ideological bent of conservative Republicans.
The GOP has been eager to blame the entire housing collapse on lending to sub-prime borrowers and government policies they believe encouraged irresponsible mortgage offerings. That narrative ignores heaps of evidence that Wall Street greed and massive collusion between lenders, insurers, and ratings agencies were the actual causes of the bubble — and that government housing policy was chasing private money, not leading it.