In the wake of the devastating crash of the housing market, the U.S. Dept. of Housing and Urban Development was forced to increase mortgage insurance premiums for borrowers with loans insured by the Federal Housing Administration, effectively stopping hundreds of thousands of potential homeowners from climbing the property ladder. With the market stabilizing, HUD is rolling back most of that rate increase for new homeowners in the hope that it will spur more borrowing.

The mortgage insurance is required on FHA-backed loans that only require as little as 3.5% of a down-payment from borrowers. Such loans are predominantly used by first-time borrowers and low- to middle-income consumers who don’t have the cash on hand for larger down payments.

But the FHA’s Mutual Mortgage Insurance fund, which is used to provide the insurance, is intended to operate without taxpayer support. So when the market crashed, the MMI fund began operating at a substantial loss, even while HUD raised insurance rates from .8% to 1.35%.

This made homeownership more expensive for new borrowers and priced some potential borrowers out of the market. The National Association of Realtors estimates that in 2014 alone more than 230,000 creditworthy borrowers were kept out of being homeowners because of the high insurance premiums.

In recent years, the MMI fund has returned to the positive side of the ledger book, bringing in $21 billion during the past two years. And so today HUD Secretary Julián Castro announced a reduction of mortgage insurance rates for FHA-backed borrowers to .85%.

HUD estimates this will translate into annual average savings of $900 for affected homeowners.

“It could be a full month’s payment that they’re saving,” said President Obama in prepared remarks, “and that could make all the difference for a family that is owning its first home.”

The feds hope that the rate reduction will help add around 250,000 new homeowners to the economy in the next three years, along with helping existing homeowners looking to move up to something pricier than their current digs.

“This action will make homeownership more affordable for over two million Americans in the next three years,” said Castro in a statement. “By bringing our premiums down, we’re helping folks lift themselves up so they can open new doors of opportunity and strengthen their financial futures.”

The NAR, which has been actively pushing for a rate reduction to help turn around the current record-low homeownership numbers, applauded today’s announcement.

“We are optimistic that more affordable FHA loans will have a positive impact on first-time buyers who have been entering the market at a lower than normal rate,” said National Association of Realtors President Chris Polychron in a statement.

The new premiums are slated to kick in later this month. The FHA will provide more details as they become available.

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