Cutting home buyers some slack
The Obama Administration announced today that it will cut the fees charged by the Federal Housing Administration (FHA), in an effort to open up home ownership to more Americans. The FHA does not technically provide loans to home buyers; instead, it insures the firms that do provide those loans against potential losses, and tacks on its fees — paid by the borrowers — to raise the cash cushion necessary to do that.
The recession cleaned out that cushion, driving it into a negative balance. So FHA jacked up the fees to 1.35 percent. The White House's new plan will reduce them to 0.85 percent, which FHA projects will save the average first-time home buyer $900 a year.
Housing advocates had pushed for the cut, as well as interest groups like the Mortgage Bankers Association and the National Association of Realtors, out of concern that skittish lenders are locking too many Americans out of the housing market. Republicans, meanwhile, criticized the move on the grounds that FHA's cash reserves are not yet back to their legally-mandated level.
President Obama will provide more specifics in a speech on Thursday.