Making FHA more expensive gives competitive advantage to other loans

Reversing a .25% cut in FHA insurance rates = $500 a year on a $200,000 home. And certainly states like New York, Florida (especially the beach areas), and New Jersey (especially coastal areas) will be affected…

The Intercept:

January 20 2017, 1:02 p.m.

Ben Carson, who Trump has nominated to replace Castro, said at his confirmation hearing that he would “really examine” the FHA insurance cut, and that he wasn’t consulted about it. Conservatives have warned for yearsthat the MMIF is dangerously insolvent, despite the recent robust balance sheet.

In addition, by making FHA loans more expensive, traditional bank mortgages become more competitive. Banks typically earn more in profit from of their own products than from FHA loans. So this initial Trump policy also generates a competitive advantage for mortgage lenders to make more money for their business.

Based on analysis by Attom Data Solutions, the reversal means an extra $446 million for the MMIF, and concurrently that much less in the pocketbooks of an estimated 1 million homebuyers projected to take out FHA loans in 2017.

Trump’s inaugural rhetoric on “transferring power from Washington, D.C., and giving it back to you, the people” is at odds with the specific action of increasing fees on middle-class homebuyers to bolster a government insurance fund.

Because more expensive home markets would be more affected by the increase, the reversal certainly hits liberal America harder. Counties like Santa Clara, Alameda, and Santa Cruz, California, and Honolulu and Maui, Hawaii, would see the biggest increases, from $1,253 to $1,448 annually.

One response to “Making FHA more expensive gives competitive advantage to other loans

  1. IF I understand the issue correctly, the 0.25% ‘cut’ had yet to occur and was pending. All the action did was leave it the same as it was.

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