Trump Signs Housing Affordability Order Targeting Mortgage Insurance
President Trump signed an executive order on Thursday aimed at easing housing affordability, with a central focus on mortgage insurance premiums that hundreds of thousands of homeowners pay annually. The order directs the Federal Housing Finance Agency (FHFA), which oversees Fannie Mae and Freddie Mac, to create a pilot program that would automatically cancel borrowers' private mortgage insurance (PMI) once they have sufficient equity in their homes.
Currently, borrowers with conventional loans who put down less than 20% must pay PMI until their equity reaches 20%, at which point they can request cancellation. Lenders are required to automatically terminate PMI when equity hits 22%. The pilot would streamline this process, potentially saving borrowers $30 to $70 per month per $100,000 borrowed, according to Freddie Mac estimates. However, some mortgage brokers report premiums are often lower, and the U.S. Mortgage Insurers trade group says premiums have fallen 25% since 2017.
The order also establishes a task force on manufactured housing construction innovation, expands a pilot that waives title insurance for certain refinancings, and directs officials to lower rates on the small number of home loans made directly by the Department of Veterans Affairs and Department of Agriculture.
PMI Use Has Risen Sharply
The move comes as PMI usage has climbed significantly in recent years. As of 2024, 36% of conventional mortgage borrowers paid PMI, up from 25.4% in 2016, according to Urban Institute data. The increase reflects rising home prices that have forced more buyers to put down less than 20%.
Mortgage Rates See First Drop in Over Two Months
The executive order arrived just days after mortgage rates posted their first weekly decline in over two months. The average 30-year fixed-rate mortgage fell to 7.32% for the week ending Wednesday, down from 7.4% a week earlier, according to Freddie Mac. The slight relief came as Treasury yields eased amid political and economic unrest in Europe, which drove investors toward safe-haven assets.
Despite the dip, rates remain near multiyear highs. Data from the Zillow lender marketplace on Saturday showed the 30-year fixed rate at 7.12%, with shorter-term rates falling more sharply: the 15-year fixed rate dropped 22 basis points to 6.48%, and the 5/1 adjustable-rate mortgage fell 24 basis points to 7.00%. Refinance rates also eased, with the 30-year fixed refinance at 7.11%.
"The housing market continues to face significant headwinds as elevated mortgage rates and affordability pressures keep many prospective buyers on the sidelines," said Bob Broeksmit, president and CEO of the Mortgage Bankers Association (MBA). Mortgage applications for new home purchases dropped 7% week-over-week, according to the MBA.
Affordability Pressures Keep Buyers on Sidelines
The combination of high home prices and elevated mortgage rates has created a challenging environment for prospective buyers. Since 2020, the median U.S. existing home price has increased by more than 50%, while mortgage rates have also risen substantially. The result is that monthly mortgage payments are now much higher, straining affordability for many households.
Suryansh Sharma, director of equity research covering the housing industry at Morningstar, noted that the market has shifted from a seller's market to a buyer's market. "The tables have completely turned, and there are many more sellers compared with buyers," Sharma said. He added that home prices will likely remain under pressure for the next two years.
The Federal Reserve raised interest rates in September, with expectations of another hike this year, further complicating the affordability picture. Higher rates directly impact buyers' purchasing power and the overall health of the housing market.
Lock-In Effect Compounds Inventory Challenges
Many homeowners who secured cheap mortgages during the pandemic are reluctant to sell, creating a "lock-in effect" that limits inventory. This dynamic has contributed to the supply-demand imbalance in the market. While housing starts are declining, the pipeline of inventory remains decent, according to Sharma, but the balance between buyers and sellers has clearly shifted.
The MBA's data underscores the cooling demand: purchase applications fell 7% in a week even as rates dipped. This suggests that buyers remain cautious despite the modest rate relief.
Broader Implications for Housing Policy
The executive order represents a targeted attempt to address specific cost burdens rather than a broad intervention in the mortgage market. By streamlining PMI cancellation, the administration aims to reduce monthly payments for homeowners who have built equity. However, the impact may be limited, as borrowers can already request PMI cancellation at 20% equity and lenders must automatically cancel at 22%.
The pilot program could accelerate the process and reach homeowners who are unaware of their cancellation rights. But with PMI premiums varying widely and already declining, the savings may be modest for many.
The order's other provisions—manufactured housing innovation, title insurance waivers for refinancing, and lower VA and USDA loan rates—signal a piecemeal approach to affordability. Whether these measures meaningfully improve access to housing remains to be seen, especially with rates above 7% and home prices near record highs.
As the housing market continues to navigate high rates and tight affordability, the coming months will reveal whether policy tweaks and slight rate declines can coax buyers back. For now, many remain on the sidelines, waiting for a more favorable combination of prices and rates.
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