Tags: Smith | FHA | mortgage | home

Realogy CEO Smith: High FHA Fees Suppressing the Housing Market

By    |   Wednesday, 17 September 2014 12:04 PM

High Federal Housing Administration (FHA) fees are preventing first-time homebuyers from buying homes, suppressing the housing market and stifling the overall economy.

That's what Richard Smith, CEO of Realogy Holdings, a real estate brokerage and franchise operation, charges in an op-ed piece for the American Banker.

The FHA raised mortgage insurance fees during the recession to cover a spike in defaults, but the housing market has stabilized and the agency should lower the fees, Smith argues.

Editor’s Note:
Get These 4 Stocks Before 399% Stock Market Rally!


"Well-intentioned but outdated federal policies are keeping America's housing sector from achieving a full recovery," he states.

"What our economy needs now are fewer barriers to first-time homeownership — not more."

FHA borrowers pay the FHA mortgage insurance through up-front fees and monthly premiums. If homeowners default, the FHA taps its insurance fund to repay mortgage lenders, Smith explains.

Armed with the insurance fund, the FHA has helped more than 34 million Americans buy homes since created in the 1930s. Ironically, the FHA has become more of a barrier than a help for first-time homebuyers, he contends.

Monthly FHA insurance premiums are now 1.35 percent of the loan amount, a whopping 145 percent increase from 2010. A borrower with a $180,000 loan pays an extra $120 a month. Up-front payments have also jumped drastically, from 1 percent to 1.75 percent.

That's at least partly why first-time home purchases are at historic lows, representing just 28 percent of existing home sales so far this year, well below the long-term benchmark of 40 percent.

The FHA should allow borrowers to finance a larger portion of insurance payments through monthly payments over the life of the loan, terminate payments once homeowners obtain 20 percent home equity and provide insurance for more condominiums, a significant market for first-time homebuyers, Smith suggests.

High unemployment, crushing levels of student debt and overall strict lending requirements are also hampering first-time homebuyers, he adds.

"But perhaps the biggest and most surprising challenge faced by today's aspiring homeowners comes from the FHA, the very agency created to help them."

The National Association of Realtors (NAR) also believes FHA insurance premiums are too high. The FHA should reduce the monthly premiums and stop requiring borrowers to pay them for the life of the loan, NAR President Steve Brown argues in a letter to the FHA.

"Achieving homeownership has become more difficult with current FHA mortgage insurance premiums," he writes, saying FHA fees now make up nearly 20 percent of a monthly mortgage payment.

Editor’s Note: Get These 4 Stocks Before 399% Stock Market Rally!

Related Stories:

© 2020 Newsmax Finance. All rights reserved.


   
1Like our page
2Share
Finance
High Federal Housing Administration (FHA) fees are preventing first-time homebuyers from buying homes, suppressing the housing market and stifling the overall economy.
Smith, FHA, mortgage, home
452
2014-04-17
Wednesday, 17 September 2014 12:04 PM
Newsmax Media, Inc.
 
Newsmax TV Live

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved