FHA ups mortgage insurance premiums

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JEREMY HOBSON: In the midst of all the government efforts to stimulate home buying, here's a surprise: The cost of mortgage insurance backed by the Federal Housing Administration is set to increase this fall.

John Dimsdale explains what that means for home buyers.

JOHN DIMSDALE: Recent foreclosures and delinquencies have depleted the FHA fund that insures mortgages. To restore it, Congress allowed the agency to nearly triple the monthly premiums.

FHA Commissioner David Stevens says the price won't go up to the maximum, but the increase will still average nearly $40 a month.

DAVID STEVENS: Today FHA's portfolio has experienced a significant amount of stress because a lot of the loans we originated during the heyday ended up being very high risk loans.

To help home buyers afford the increase, FHA is lowering the initial down payment for insurance by close to a $1,000 on average.

John Anderson with Twin Oaks realty in Minneapolis says the higher premiums could push some crucial home buyers out of the market.

JOHN ANDERSON: If we have a first time home buyer, when it gets right down to it, $10 a month, $20 a month can make a difference in what house they're gonna be able to buy. It is going to affect affordability.

The fee increase, originally set to begin this week, was delayed a month to give lenders more time to update their computer systems.

In Washington, I'm John Dimsdale for Marketplace.

About the author

As head of Marketplace’s Washington, D.C. bureau, John Dimsdale provides insightful commentary on the intersection of government and money for the entire Marketplace portfolio.
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Mr. Anderson's comment makes me believe that we still haven't learned about responsible borrowing (and lending). If $10 or $20 per month makes a difference in the kind of house a person can afford, they probably should not be in the market.

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