President Barack Obama Thursday defended his decision to order federal housing officials to lower the mortgage-insurance premiums borrowers pay when they get a loan backed by the Federal Housing Administration.
Obama used a speech in Arizona to address push back from conservative Republicans, who argued lowering mortgage insurance premiums left taxpayers on the hook if the housing sector should go belly up again like it did in 2007, triggering the Great Recession. He told a friendly audience at Central High School in Phoenix that stiffer lending rules and regulatory changes ensure there won’t be a repeat of the housing boom that went bust.
“These rates are for responsible buyers. We’re not going down the road again of financing folks buying things they can’t afford,” Obama said. “We’re going to be cracking down on that. We put in place tough rules on Wall Street and we created a Consumer Financial Protection Bureau, and we’re really policing irresponsible lenders luring folks into buying stuff they can’t afford.”
The White House on Wednesday confirmed that it would lower mortgage-insurance premiums on FHA loans_ where a borrower puts down just 3.5 percent of the total purchase as a down payment_ from 1.35 percent to 0.85 percent. That, Obama repeated in Phoenix, will save some new borrowers as much as $900 a year in private-mortgage insurance that’s required when taking out an FHA loan.
House Financial Services Committee Chairman Jeb Hensarling, R-Texas, has been the most vocal critic of the move. He fired off a letter Thursday to the new head of the Department of Housing and Urban Development, calling Julian Castro to testify before his committee next month.
“Before appearing before the Committee, however, I request that you provide the Financial Services Committee … the written analysis and data HUD used to justify recent changes in the FHA single family policy premium structure,” Hensarling wrote.
In the letter to Castro, the chairman suggested the rainy-day fund required of FHA was inflated because of one-time benefits that flowed into it such as the Justice Department settlement with big mortgage lenders. Hensarling asked HUD to calculate that rainy-day reserve without the benefit of the settlement money and a support payment received from the Treasury Department.