From the Record:
After more than doubling home buyers’ annual fees in the wake of the housing bust, the Federal Housing Administration is facing pressure to roll back the fees, especially now that its insurance fund is in the black again.
The homeowners affected are typically lower- and moderate-income borrowers because FHA loans allow for lower credit scores and lower down payments than other mortgages.
The annual insurance premium paid by most FHA borrowers has risen to 1.35 percent, up from 0.55 percent in 2010 — or more than $300 a month on a $300,000 mortgage. The higher premiums helped to shore up the FHA insurance fund, but they also push up the cost of buying a home, and industry groups say that has slowed the real estate recovery.
Both the National Association of Realtors and the Mortgage Bankers Association have called on the FHA to consider lowering the annual premiums. They were recently joined by the Center for American Progress, a Washington-based progressive group.
The National Association of Realtors estimated that last year, nearly 400,000 creditworthy borrowers were unable to buy homes because of the higher FHA premiums.
“By lowering its fees, FHA could provide greater access to homeownership for historically underserved groups,” the group said.
In response, the FHA issued a statement saying it is “regularly evaluating a number of factors to ensure our premiums are at the right levels.”
“As a result of the most recent annual report, we are looking through new information and will use that to inform any future decisions,” said a statement from the FHA’s parent agency, the U.S. Department of Housing and Urban Development.
The FHA’s annual report, released recently, said its mortgage insurance fund has a $4.8 billion surplus, after two years of having a balance below zero because of loans gone bad. But, at 0.4 percent of the total FHA insurance outstanding, the fund is still below the 2 percent level required by law. The fund is an extra safety cushion, required by Congress, on top of the annual reserves set aside each year to cover the loans insured in that year.