FHA Mortgage Premiums

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One of the first acts President Trump took after assuming office was to suspend a rate cut in FHA mortgage insurance premiums enacted just a week earlier by former President Obama. Tina Tamboer of the Cromford Report, which provides information on the greater Phoenix residential real estate market, will discuss the change.

TED SIMONS: GOOD EVENING AND WELCOME TO "ARIZONA HORIZON." I'M TED SIMONS. ONE HOUR AFTER TAKING OFFICE LAST WEEK, PRESIDENT TRUMP SUSPENDED A RATE CUT IN FHA MORTGAGE INSURANCE PREMIUMS THAT WAS ENACTED JUST A WEEK EARLIER BY FORMER PRESIDENT OBAMA. HERE TO TALK ABOUT WHAT THE SUSPENSION MEANS TO THE "LOCAL" HOUSING MARKET IS TINA TAMBOER OF THE CROMFORD REPORT, WHICH FOCUSES ON THE VALLEY'S RESIDENTIAL REAL ESTATE MARKET. GOOD TO HAVE YOU HERE. THANK YOU FOR JOINING US.

TAMBOER: THANK YOU FOR HAVING ME.
TED SIMONS: LET'S LOOK AT THE TERMS. THIS IS A LITTLE CONFUSING FOR MOST FOLKS. SPENDING RATE CUTS FOR FHA BACK LOANS. WE'LL START, WHAT ARE FHA BACK LOANS.

TAMBOER: FHA BACK LOANS ARE GOVERNMENT INSURED LOANS WITH A CREDIT SCORE LOWER THAN THE CONVENTIONAL LIKES AND THE GOVERNMENT COMES IN AND SAYS TO YOUR LENDER WE WILL INSURE THIS LOAN AND AS A RESULT YOU GET MORTGAGE INSURANCE IN CASE YOU WERE TO DEFAULT WHICH HELPS LESSEN THE RISK TO THE LENDER.

TED SIMONS: SO BASICALLY, IT ENSURES MORTGAGES AND IT COLLECTS FEES FROM THE BORROWER AND THOSE FEES ARE USED, AS YOU SAY, TO PROTECT BORROWERS IN CASE THE BORROWER DEFAULTS.

TAMBOER: REDUCES THE RISK.

TED SIMONS: SO SPENDING THESE MORTGAGE INSURANCE RATE CUTS, WHAT DID FORMER PRESIDENT OBAMA DO AND WHY?

TAMBOER: WHEN THE RATES WERE CUT, THEY WOULD HAVE ADDED AN EXTRA SOMEWHERE AROUND THE LINES OF $35 TO $45 OFF OF YOUR MORTGAGE PAYMENT WHICH FOR SOME PEOPLE, YOU NEED RATIOS FOR YOUR DEBT TO INCOME RATIO. IT WOULD'VE HELPED INCREASE THOSE AND PROVIDED MORE PEOPLE TO BE ABLE TO GET APPROVED, BUT THERE ARE THINGS OUTSIDE OF THE MORTGAGE INSURANCE PREMIUMS THAT ARE ALSO HELPING THE BORROWERS OUTSIDE OF THAT ADDED MONEY OFF OF THE PAYMENT TO ALLOW THEM TO GET MORE APPROVAL THESE DAYS. THERE ARE SO MANY THINGS GOING ON. THIS IS ONE SMALL THING HAPPENING IN THE REAL ESTATE MARKET. SOME OF THE REACTIONS GOING ON IN POLITICS ON BOTH SIDES, IT HAS MORE TO DO WITH THEM THAN HOW ITS REALLY GOING TO AFFECT OUR MARKET HERE.

TED SIMONS: PRESIDENT OBAMA SAID PASS ALONG THE MODEST SAVINGS TO WORKING FAMILIES BECAUSE THE FUND IS 16% HIGHER THAN THE LEGAL MINIMUM. REPUBLICANS SAY IT'S ONLY 16% HIGHER THAN THE LEGAL MINIMUM AND LOOK BACK A FEW YEARS AGO WHEN THE FHA HAD TO HAVE A $1.7 BILLION BAILOUT, THEY WANT TO MAKE SURE FHA IS HEALTHY AND STABLE THUS GET RID OF THE CUT. AN HOUR AFTER TAKING OFFICE, THE TRUMP ADMINISTRATION GOT RID OF THE CUT.

TAMBOER: IT WAS SHORT LIVED. AS FAR AS I CAN TELL THER EWAS ONE OTHER FHS CHANGE THAT STAYED PUT, AND THAT WAS THE INCREASE TO THE LIMIT OF WHICH TO LOAN. THAT WOULD ONLY LOAN UP TO $271,000 -- OR INSURE $271,000. NOW IT'S $276,000.

TED SIMONS: LET'S FOCUS NOW INTO ARIZONA AND THE VALLEY HOUSING MARKET. SOMETHING LIKE THIS, YOU ARE A MILLENNIAL WITH POOR CREDIT, SOMETHING ELSE ALONG THOSE LINES. HOW DOES THIS AFFECT YOU?
TAMBOER: IT MAY OR MAY NOT AFFECT YOUR ABILITY TO GET APPROVED FOR A LOAN SO MUCH AS TO WHAT SIZE HOME YOU GET. WE'RE STILL SEEING LARGER APPROVAL RATES. FHA HAS 20% MARKET SHARE OF THE LOANS. YOU HAVE A LARGE CONVENTIONAL 66% OF ALL LOANS ARE CONVENTIONAL. BECAUSE YOU ARE A MILLENNIAL DOESN'T MEAN YOU MAY OR MAY NOT QUALIFY FOR CONVENTIONAL. IN TERMS OF FHA, IF YOU ARE CREDIT SCORE IS ON THE LOWER END, FHA TENDS TO BE RIGHT THERE AROUND 650 TO 700, THEN THIS LITTLE EXTRA PIECE, THIS AFFECTS THE AMOUNT YOU GET APPROVED FOR, BUT YOU ARE PART OF THE DEMAND. YOU MAY HAVE TO BUY A SMALLER HOME.

TED SIMONS: I READ THAT HAD THE CUTS REMAINED, IT WOULD SAVE HOMEOWNERS 29 OR $30 A MONTH ON A $200,000 LOAN. THIS CUT BY FORMER PRESIDENT OBAMA HADN'T EVEN TAKEN PLACE YET, IT WAS SUPPOSED TO TAKE EFFECT THIS FRIDAY. THE TRUMP ADMINISTRATION SAYS MORE ANALYSIS AND RESEARCH IS NEEDED. WHO KNOWS WHAT THAT MEANS?

TAMBOER: I THINK IF THE PURPOSE OF THE CUT WAS TO INCREASE IN DEMAND, WE WERE INCREASING IN DEMAND WITHOUT THE CUT. I DON'T THINK IT'S A DETRIMENT TO OUR PARTICULAR MARKET AS IT IS. WE STILL HAVE PLENTY OF DEMAND IN THE FHA PRICE RANGE UNDER $300,000. IF ANYTHING, WE HAVE NOT ENOUGH SUPPLY. FOR THOSE ANALYSTS STATING THEY ARE AFRIAD IT THIS WILL CAUSE A DECREASE IN PROPERTY VALUES OR WHATEVER, IT ISN'T THE CASE. WE HAVE MORE THAN ENOUGH DEMAND UNDER 300. WE DON'T HAVE ENOUGH SUPPLY FOR THE BUYERS OUT THERE. AS FAR AS HOW IT WOULD HAVE BENEFITED OUR MARKET IN GENERAL, IT PROBABLY WOULDN'T HAVE A HUGE EFFECT ON ANYTHING. WE DON'T HAVE ENOUGH TO SELL UNDER $300,000. EVEN IF YOU INCREASE THE NUMBER OF BUYERS, YOU CAN'T INCREASE THE NUMBER OF SALES WITHOUT INCREASING LISTINGS.

TED SIMONS: THE ACCESS OF MORTGAGE CREDIT REALLY NOT AFFECTED ALL THAT MUCH.

TAMBOER: YOU HAVE AN INCREASED INTEREST RATE NOW. A LOT OF SAVINGS WOULD HAVE BEEN EATEN UP BY HIGHER INTEREST RATE AND GROWING PRICES.

TED SIMONS: YOU CAN LOOK AT IT FROM THE OTHER ANGLE SAYING THIS HAPPENS ON TOP OF THE INCREASE OF MORTGAGE INCREASE RATES. FOR THOSE FIRST TIME BUYERS AND THOSE WITH NOT GOOD CREDIT, NOT SO GOOD.
TAMBOER: IN A REGULAR MARKET, THE MARKET TENDS TO REGULATE ITSELF. IF BUYERS ARE COMING IN, THEY CAN'T QUALIFY FOR MORE. THE MARKET SHARE WITHIN PRINCE RANGE SHIFTS.THE SELLERS BECOME MORE COMPETITIVE WHEN THEY NEED TO BE.
TED SIMONS: WHAT ARE YOU SEEING RIGHT NOW? LETS GO INCOME AND PRICES, THAT LOWER LEVEL, $200,000? ALONG THOSE LINES? WHAT ARE YOU SEEING OUT THERE? IS THIS SUPPLY NOT THERE?
TAMBOER: HERE'S THE THING, BUILDERS ARE NOT BUILDING A LOT OF SUPPLY. UNLESS WE HAVE REGULAR HOMEOWNERS WHO WANT TO LIST THEIR HOME AS RESALE, WE DON'T HAVE A LOT HAPPENING RIGHT NOW. IN TERMS OF WHERE THE SUPPLY IS BEING ADDED, THE BUILDERS ARE MOST LIKELY GOING TO BE IN THE 300 TO 500 RANGE OR AT LEAST 250 TO 500.

TED SIMONS: SUPPLY BETTER THERE?

TAMBOER: YES, THERE'S A LOT MORE TO CHOOSE FROM. IF YOU ARE A BUYER AND YOU WANT MORE SUPPLY IN THE NEW HOME RANGE, LOOKING AT BUCKEYE, ANYWHERE IN THE PINAL COUNTY AREAS, FLORENCE, MARICOPA, LAVEEN, FOR INSTANCE. THAT IS WHERE THEY ARE TRYING TO BALANCE OUT THE MARKET. THERE IS A LOT OF DEMAND FOR THE PRICE POINT.
TED SIMONS: GOOD INFORMATION. GOOD TO HAVE YOU HERE. APPRECIATE IT.

TED SIMONS: COMING UP NEXT ON ARIZONA HORIZON, WE'LL FIND OUT WHY TEMPE COULD VERY WELL BECOME THE VALLEY'S FASHION HUB.

Tina Tamboer: The Cromford Report

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