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OCR Page 1 of 16file FHA
hud NEWS
Department of Housing and Urban Development - Andrew Cuomo, Secretary
Office of Public Affairs, Washington, DC 20410
HUD No. 00-310
FOR RELEASE
(202) 708-0685
Monday
www.hud.gov/news.html
October 30, 2000
FHA reforms will save families a billion dollars annually
CUOMO SAYS FHA WILL CUT THE COST OF MORTGAGE INSURANCE
SAN FRANCISCO - U.S. Housing and Urban Development Secretary Andrew Cuomo today
released the details of a plan that will save more than one million homeowners with Federal Housing
Administration-insured mortgages in excess of $1 billion annually in insurance costs.
Cuomo said that the FHA's Homebuyer Savings Plan will reduce up-front insurance premiums
by one-third, eliminate annual premiums after a homeowner has built 22 percent equity in the home,
and pay premium refunds to current FHA borrowers. Cuomo made the announcement to an estimated
6,000 attendees of the 87ᵗʰ Annual Mortgage Bankers Association Convention in San Francisco.
"After four years of reforming FHA, today we are putting the fruits of our success to work for
American families," Cuomo said. "The Homebuyer Savings Plan will lower the cost of
homeownership and help families take a giant step toward sharing in the American dream."
The Homebuyer Savings Plan will reduce the premium requirement from 2.25 percent to 1.5
percent of the original loan amount. As a result, a family with a typical $100,000 FHA-backed
mortgage will save $750; for larger mortgages the initial savings may be as much as $1,650.
Cuomo also announced that the Plan will eliminate entirely FHA's annual premium of .5
percent (or 50 basis points) on all loans once homeowners build 22 percent equity in their home.
Modeled after private mortgage insurance (PMI) cancellation legislation passed by Congress in 1998,
this premium reform will further reduce the cost of FHA mortgage insurance. Unlike the PMI
legislation, however, FHA will continue to enhance consumer protection by insuring the mortgage
even after the annual premium payments are eliminated.
These two parts of the plan will save the typical FHA consumer an average of $1,500 over the
life of a $100,000 loan.
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