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FHA Raising Its Premiums

By JLP | August 28, 2008

Saw this in yesterday’s Wall Street Journal.

Beginning October 1, the FHA’s upfront premium charged to most borrowers will increase to 1.75% from its current 1.5%. The WSJ gave an example that the upfront premium on a $300,000 loan will be $5,250, which is $750 higher than the old premium. The annual premiums will remain at 0.50% to 0.55% of the loan balance.

I found the last part of the article ($) quite interesting as it echoed a lot of the thoughts coming from me and the readers of this blog. Check this out (emphasis mine):

Congress has given the FHA a prime role in backing new, more affordable loans for people who are struggling with their current mortgages. Those refinances are likely to be risky because borrowers who are rescued once often fall behind again later.

Let me repeat that:

BORROWERS WHO ARE RESCUED ONCE OFTEN FALL BEHIND AGAIN LATER!!!!

This makes perfect sense when you think about it. Think about a kid who constantly gets into trouble and gets bailed out by mommy and daddy—only this time the kid is a borrower and mommy and daddy is the U.S. taxpayer.

It’s time to cut those apron strings.

Topics: Housing Market | 2 Comments »


2 Responses to “FHA Raising Its Premiums”

  1. DM Says:
    August 28th, 2008 at 10:54 am

    I have a better idea, let’s just get rid of FHA entirely. Think of the government (read: taxpayer) savings.

    When you think about it, having programs to make homes more affordable actually drives up the cost of housing due to more demand.

    Let’em rent!

  2. Mr. ToughMoneyLove Says:
    August 28th, 2008 at 11:09 am

    No apron strings will get cut until the incumbent politicians are safely returned to office. These programs buy votes pure and simple.

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