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An hour after Donald Trump assumed the presidency Friday, his administration indefinitely suspended a pending rate cut for mortgage insurance required for FHA-backed loans, which are popular with first-time home buyers and those with poor credit.
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 waning days of the Obama presidency that would have trimmed insurance premiums average of $500 this year, according to the Federal Housing Administration. Borrowers with larger home loans would have seen an even bigger drop in their premium rate
Some Republicans expressed concern that the rate cut could cost taxpayers if the loans started to go sour and the Federal Housing Administration was unable to cover the losses. The agency needed a $1.7-billion bailout from the U.S. Treasury in 2013 after it expanded its role last decade after the collapse of the subprime mortgage market.
The FHA does not issue loans, but instead insures mortgages and collects fees from borrowers to reimburse lenders in case of default. Borrowers can qualify for an FHA-backed mortgage, with down payments as small as 3.5%, even with a credit score as low as 580, which could signal a past bankruptcy or debts sent to collection.