HUD Cuts All Multifamily Mortgage Insurance Premiums to 25 Basis Points

In an important win for NAHB members, the Federal Housing Administration (FHA) announced that effective Oct. 1, it is reducing the FHA multifamily mortgage insurance premiums (MIP) for all multifamily programs to 25 basis points.

The Department of Housing and Urban Development (HUD) announced it would reduce MIPs to 25 basis points - the statutory minimum the agency must charge - early this summer. To put this reduction into context, multifamily MIPs ranged from 25 basis points up to 95 basis points unless the project was part of a special program.

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

HUD made 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. Lower MIPs will reduce multifamily financing costs and help expand the supply of rental housing.

The MIP reductions are effective for any FHA multifamily mortgage insurance applications submitted or amended on Oct. 1, so long as the loan has not been initially endorsed.

As part of its announcement, FHA is also eliminating as moot 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 remained 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 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