What You Should Know About Trump and FHA Loans

Trump’s first day in office entailed eliminating MMI cuts for FHA loans.

Trump and FHA loans does not have a nice ring to it. It’s not just the new borrowers with FHA loans who are suffering under the Trump administration. According to the National Association of Realtors, the actions taken by Trump on his first day in office have set the stage for 750,000 to 850,000 borrowers to pay more for a mortgage this year. Trump suspended an Obama program a few days before it was due to go into affect. Critics shrug shoulders and say what difference does it make since it wasn’t a policy yet. How can something you take away that is not yet law affect anybody? And I’d say they are not looking at the whole picture, just tiny fragments of it.

For starters, many buyers were processing loans based on the new changes to FHA. When Trump smashed those rate cuts, it affected all of the borrowers hoping to close escrow by the end of January and into early February. One of my own closings was held up, and wouldn’t you know it, it was a short sale, of all things. I hardly do any short sales in Sacramento anymore, maybe 2% of all of my Sacramento real estate sales are short sales, but this particular short sale involved an FHA buyer slated to close on January 30th. It’s not gonna happen now because of Trump. That closing will be delayed because the lender had to reissue the closing disclosure, which started the 3-day window again, and we can’t close on time due to the delay.

This means we have to beg and plead with the short sale lender to please please please grant us an extension. Please do not charge the borrower a per diem for the delay or make us start the short sale over, which is certainly the lender’s option. We could not foresee that Trump, with all of his promises to help the ordinary folks in America, would do this to first-time home buyers. Who knew? We were under the impression Trump was fighting for the people who voted for him. I guess not. The words Trump and FHA loans just don’t play nicely together in the sandbox.

The cut put into place by former President Obama involved a reduction in the mortgage insurance premium. Depending on the matrix, that could be a reduction from .85 to .60, and it varies. Overall, it was supposed to save borrowers at least $500 a year, maybe more, by reducing the mortgage insurance premium paid. The National Association of Realtors said in a statement that President Trump’s actions have reduced the number of borrowers who will now qualify for an FHA loan as this reduction was to be an offset against rising interest rates.

But no, President Trump put a stop to all of that. Let’s hope the Republicans pull together and try to find a way to make amends. Better yet, let’s hope the words Trump and FHA loans do not appear together again in the same sentence. When something works as well as FHA loans, maybe you should leave them alone.