Mortgage Bankers Assail FHA Fees
WASHINGTON - Higher Federal Housing Authority charges that took effect Monday will force about 100,000 would be homeowners out of the market, contends the Mortgage Bankers Association of America.
The Department of Housing and Urban Development, which oversees the FHA, disputed the trade group's claim. It estimated that as a result of the higher fees, 20,000 fewer mortgages would be approved.
The FHA has increased mortgage insurance premiums by half a percentage point and limited financing of closing costs to about 57% of those expenses.
Warren Lasko, MBA executive vice president, called a press conference this week to attack the new policy on closing costs, which is intended to strengthen loan quality.
Defaults Plague FHA
The FHA has been hit hard in recent years by loan defaults. HUD is running ads soliciting buyers for more than 35,000 repossessed houses.
Mr. Lasko said the new fees would eliminate applicants whose annual salaries fall in the $25,000-to-$30,000 range.
The biggest impact will come from forcing homebuyers to pay more closing costs up front and charging them a monthly mortgage insurance premium, he said.
Closing costs would amount to $918 for a loan on a $75,000 house, and the insurance fees would run about $32 a month.
Even with the increases, closing costs on an FHA loan remain about $2,432 less than those charged by private mortgage companies.
MBA Asks for Rollback
The mortgage banking group said it wants the FHA to roll back the change in closing costs, which could be done without congressional action.
But a change in law would be needed to reduce the insurance premium.
"We think they went too far," Mr. Lasko said.