Trump’s Good First Move The Trump team sends a message to a big lobby.

Posted By on January 21st, 2017

http://www.wsj.com/articles/trumps-good-first-move-1484957085

That was fast. Less than an hour after President Trump’s swearing in, his Department of Housing and Urban Development suspended the Obama Administration’s last-minute gift to the housing lobby to cut mortgage insurance rates.

Former Secretary Julian Castro announced last week that HUD would lower by 0.25% what the Federal Housing Administration charges on a risky mortgage backed by taxpayers. On loans exceeding $625,000, the premium cut would have been 0.45%. The reductions were scheduled to take effect next Friday.

Mr. Castro promoted the reductions as a way to lower costs for homeowners as he went out the door, but the move was a classic example of the clout of the housing lobby. Realtors, home builders and “fair-housing” advocates have been lobbying for the cut as interest rates begin to rise. They hoped the lower cost of this government subsidy would help them originate more mortgages. Mr. Castro, who has future political ambitions, also didn’t mind doing a favor for potential campaign donors.

The suspension of the premium cut is good government and good for taxpayers. HUD said the suspension is indefinite, which will give the new Trump team time to inspect the FHA’s books and make its own decision. Mr. Trump’s nominee as HUD Secretary, Ben Carson, isn’t even on the job and might not be for a while if Democrats continue to stonewall confirmation votes.

FHA has become a giant guarantor of mortgages with too little scrutiny. Homeowners can score FHA mortgage insurance with a credit rating as low as 580 and a mere 3.5% down payment. When home prices are rising, too few people pay attention when politicians put taxpayers more at risk. But we learned from hard experience in the previous decade that these policies can come back to haunt.

Washington’s housing-industrial complex may squawk, but the new Administration has sent the right message in reversing a bad Obama decision.

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