Storm brewing over proposed FHA MIP hike

Reports from the Mortgage Bankers Association (MBA) Commercial Real Estate Finance conference in Orlando early this month included some interesting comments about an announcement by the Federal Housing Administration (FHA) that it was nearly doubling the mortgage insurance premium (MIP) for most of its programs to 80 basis points.

FHA lenders said they'd lose huge amounts of their business. One, I'm told by a witness, basically got into a shouting match with the FHA speakers and stormed out of the room. The MBA is vowing to fight the increase (see MBA's press release), as well it might: MBA was instrumental in getting the Bush Administration to lower the MIPs over the last few years. Now the fruits of that effort are in danger of evaporating.

The reason for all of the fuss is that the MIP is apparently being raised not because the FHA programs are losing money -- in fact, I'm told they're more than paying for themselves -- but because of a wide-ranging treasure-hunt in Washington to find money to fill the gaping maw of a budget wildly out of whack (how many mixed metaphors in that sentence?).

You can look forward to Eric Wong's good coverage on the topic in the March issue of Apartment Finance Today magazine, which will be out in a couple weeks. But in the meantime, you may want to heed the words of Andrea McClure, senior vice president of CWCapital, who encourages everyone involved in FHA housing to learn more about this topic, how it affects them and their residents (who will likely get hit with a fair amount of the increase from the financing costs because investors will still demand the same returns). Then contact the National Association of Home Builders or the MBA and find out how you can help educate your legislators on the damage this MIP change could do to your business and to housing programs nationwide.