Trump Cuts Subsidy to Real Estate Industry, Opponents Call It a "Tax Increase"

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Mises:

Trump Cuts Subsidy to Real Estate Industry, Opponents Call It a "Tax Increase"

8 hours ago Ryan McMaken

 

Among the many new directives and executive orders already issued by the Trump administration is a little-noticed order to halt a scheduled cut in mortgage insurance fees levied by the FHA.

 

Earlier in January, the Obama administration announced it would cut the FHA's insurance premium by a quarter of a percentage point to 0.60 percent, effective on Jan. 27.

 

The fact that this all seems like a tiny technical issue is perhaps part of the reason why the media has paid so little attention to it. However, the Trump administration's move suggests the Administration may actually be willing to go against the grain on the Federal-government's long-term — but failed — commitment to subsidizing home-buying and blowing up housing asset bubbles.

 

FHA insurance is an important issue because the program subsidizes banks, real estate agents, and some home buyers by making loans cheaper. The FHA programs lessens to risk to lenders who make loans to riskier borrowers.

 

As Bloomberg has explained, "The FHA sells insurance to protect against defaults and doesn’t issue mortgages. It is a popular program among first-time home buyers because it allows borrowers to make a down payment of as low as 3.5 percent with a credit score of 580, on a scale of 300 to 850."