The Definition Game & How To Raise FHA Insurance Fees

by Peter G. Miller
May 15th, 2008

Story Tools

The numbers associated with the FHASecure program have been strangely bloated — but now we may have a reason for the huge claims by HUD.

First, we had former HUD Secretary Alphonso Jackson telling the world that “FHASecure has helped more than 100,000 families stay in their homes.”

Second, earlier this month UD issued a news release claiming that “since September 2007, FHASecure has helped more than 180,000 homeowners refinance their loans and avoid foreclosure.”

This would all be great except that the FHASecure was allegedly created to help borrowers facing foreclosure. Only 1,987 delinquent conventional borrowers who have been able to refinance with HUD since October 1st, the start of the fiscal year.

So why the big claims?

In my Realty Times column I mentioned this week that:

“A few days ago HUD announced that borrowers who refinance under the FHASecure program will face risk-based insurance premiums.

“Instead of one premium for all borrowers, with risk-based premiums those with poor credit pay more for insurance than those with good credit.

“This sounds reasonable, but as the Government Accountability Office reported in July, with risk-based pricing 43 percent of current FHA borrowers would pay the same or less under risk-based pricing, 37 percent would pay more, and 20 percent would not even qualify for FHA insurance.”

Someone with good credit who wants FHA financing will qualify for, well, plain, old-fashioned FHA mortgage financing. They don’t need to be part of FHASecure.

However, if HUD is going to apply a new and costly insurance charge to borrowers within the FHASecure plan, then from the Department’s perspective it makes sense to define as many borrowers as possible as being within the FHASecure effort because more dollars will go to HUD and the most-risky borrowers — borrowers who would previously have qualified for an FHA refinance — will be denied funding.

For the full story, see: HUD Plans Risk-Based Premiums For FHA Borrowers.

This entry was posted on Thursday, May 15th, 2008 at 12:59 am and is filed under , . You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.