U.S. Reps. Gregory W. Meeks of New York and Pete Sessions of Texas have reintroduced the bipartisan HR 5508, the Mortgage Insurance Freedom Act, drafted to allow borrowers to stop paying Federal Housing Administration (FHA) mortgage insurance premiums (MIPs) once they have built up a certain amount of equity in their home. Whereas private MIPs are automatically eliminated once the homeowner’s loan-to-value (LTV) ratio reaches 78%, that is not the case for FHA borrowers, who are required to pay MIPs for the entire life of their loan.
“This legislation is designed to help Americans keep more of their hard-earned money while making homeownership more attainable,” said Rep. Meeks. “The Mortgage Insurance Freedom Act lowers monthly costs for first-time buyers and young families, helping them build equity faster. By saving FHA borrowers hundreds of dollars annually, it gives families greater financial flexibility to put toward savings, investments, and daily needs. I’m proud to reintroduce this bill to expand access to affordable homeownership and strengthen financial stability for working families.”
Reps. Meeks and Sessions first introduced the Mortgage Insurance Freedom Act last December during the 118th Congress.
FHA borrowers pay MIPs, which include a one-time upfront MIP and a recurring annual MIP, to protect lenders from losses on FHA-insured loans. The upfront MIP is typically 1.75% of the loan amount, and the annual MIP varies based on the loan’s loan-to-value (LTV) ratio and loan term, but is generally between 0.15% and 0.75%. Borrowers may be able to cancel the annual MIP after a certain period or when their LTV reaches 78%, depending on their loan’s origination date and down payment size.
“I’m proud to once again co-lead this effort to promote fairness and allow American families to retain their hard-earned money,” Rep. Sessions said. “The Mortgage Insurance Freedom Act addresses a key inequity in the FHA system by eliminating unnecessary mortgage insurance premiums for individuals who have built significant equity. This practical bill rewards financial responsibility and delivers meaningful relief to homeowners across the country.”
FHA mortgage insurance protects lenders against losses. If a property owner defaults on their mortgage, the FHA will pay a claim to the lender for the unpaid principal balance. Because lenders take on less risk, they are able to offer more mortgages to homebuyers. Congress created the FHA in 1934. At the time, terms were difficult to meet for homebuyers seeking mortgages. Mortgage loan terms were limited to 50% of the property’s market value. This included a repayment schedule spread over three to five years, and ending with a balloon payment.
America was mostly a nation of renters at the outset of the FHA’s establishment, with only one in 10 households having owned homes.
Industry trade groups have praised introduction of The Mortgage Insurance Freedom Act:
Marc H. Morial, President and CEO of the National Urban League, said: “The National Urban League strongly supports the Mortgage Insurance Freedom Act, championed by Representative Gregory Meeks. FHA’s current lifetime mortgage insurance premium requirement disproportionately impacts first-time, lower-income, and minority homebuyers—the very families who rely on FHA loans as a pathway to sustainable homeownership. By aligning FHA with private mortgage insurance practices, this legislation ensures fairness, reduces unnecessary costs, and helps homeowners build equity more quickly. At a time when housing affordability is out of reach for far too many, this bill represents a meaningful step toward addressing the nation’s housing affordability crisis and closing the racial wealth gap.”
Bill Killmer, SVP Legislative and Political Affairs with the Mortgage Bankers Association (MBA), added: “The Mortgage Bankers Association supports the introduction of the Mortgage Insurance Freedom Act, which would eliminate the Federal Housing Administration’s life-of-loan mortgage insurance premium requirement. We believe borrowers with FHA-insured mortgages, who are primarily first-time and low- to moderate-income homebuyers, should have financing options comparable to those with conventional mortgages. Urging HUD to eliminate FHA’s life-of-loan requirement through a data-driven process would be a meaningful step toward making homeownership more affordable and attainable for American families.”
Click here for more on HR 5508, the Mortgage Insurance Freedom Act.
