Government Looks to Stay Put in Mortgage Market

American Banker, By James Frischling

The U.S. Department of Housing and Urban Development recently announced that the Federal Housing Administration will reduce the annual premiums that new borrowers pay by 50 basis points. The primary goal of this change is to help make homeownership more affordable for middle- and lower-middle income families. Rolling back the insurance premium, which was raised at the start of the Great Recession, is expected to benefit hundreds of thousands of borrowers who have been priced out of the market.

This move, combined with Fannie Mae and Freddie Mac’s decision to lower their down payment requirements, should help broaden access to homeownership. But these decisions also send an important message about the government’s role in the housing market. The government is not reducing its dominant place in the mortgage market: it is expanding it.

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