On Friday, the new administration suspended a 25 basis point fee reduction that the past administration announced on the 9th of January. NAR research estimated that the fee reduction would have benefited 750,000 to 850,000 homebuyers in 2017 whose mortgages were backed by the FHA. In addition, it would have opened homeownership to an additional 30,000 to 40,000 homebuyers.
It is important to note that the fee reduction has been suspended pending a review by the new administration and not eliminated. However, a wrinkle in the suspension of the fee change will have market effects. Typically, mortgage insurance premium (MIP) changes are set to affect mortgages that are endorsed by the FHA for insurance on a given date or after. However, this fee change was set to affect FHA-backed loans that close on the 27th or after. Thus, recent deals that are under contract and endorsed by the FHA would have benefited from the change as long as they settled on the 27th or later. Furthermore, under the TRID or Know Before You Owe rules that govern the settlement process, an eighth of a point (12.5 basis point) or more increase in yield on a mortgage is one of three reasons that a new closing disclosure (CD) and 3-day waiting period must be issued before settlement. In short, the impact of the 25 basis point fee change could cause a small number of settlements to fall apart or to be delayed to February.