The government is about to seriously cut the fees people pay on housing loans

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last updated 8 January 2015

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.