FHA to Cut All Multifamily Mortgage Insurance Premiums to 25 Basis Points

In an important win for NAHB members, the Federal Housing Administration (FHA) will be announcing in tomorrow’s Federal Register that it is proposing to reduce the FHA multifamily mortgage insurance premiums (MIP) for all multifamily programs to 25 basis points — the statutory minimum that HUD must charge. For context, the current multifamily MIPs range from 25 basis points up to 95 basis points.

A blanket 25 basis for all multifamily programs will make these programs cost effective and should serve to stimulate the production of multifamily housing.

HUD is making these multifamily MIP rate changes in response to current market conditions, where a sharp rise in construction costs and mortgage interest rates since 2021 has made housing less affordable. This action will lower multifamily financing costs and help expand the supply of rental housing.

The MIP rate changes may be applied to FHA multifamily mortgage insurance applications submitted or amended on or after the effective date of the notice announcing the new MIP rates, so long as the loan has not been initially endorsed. NAHB expects that HUD will quickly finalize and release the new MIPs this summer.

After the publication in tomorrow’s Federal Register, there is a 30-day comment period, and NAHB will submit detailed comments that are strongly in support of the MIP reductions.

As part of its announcement, FHA is also proposing to eliminate three MIP categories established in 2016: Green and Energy Efficient Housing, Affordable Housing, and Broadly Affordable Housing.

These three categories received preferential MIPs while market-rate property MIPs were explicitly unchanged in 2016 and remain cost prohibitive. HUD argues these programs are misaligned with President Trump’s executive order on Unleashing American Energy and that the programs would become economically obsolete. HUD further notes that FHA’s market-rate multifamily program was severely underutilized because these programs were cost prohibitive.

With the impending cancellation of FHA’s Green and Energy Efficient Housing MIP program, NAHB encourages members who are interested in constructing green properties to continue to use and/or consider the ICC 700 National Green Building Standard (NGBS).

The NGBS is the first residential green building standard to undergo the full consensus process and receive approval from the American National Standards Institute.

The NGBS has been widely implemented over the past decade — especially in the multifamily sector, as it provides architects, builders and developers with a flexible above-code program to design and construct homes and apartments that are sustainable, cost-effective and geographically appropriate.