FHA Watch, November 2013 (Vol. 2, No. 11)

Article Highlights

  • Today, the FHA program is all about cross-subsidies; the average low-risk borrower with a $150,000 mortgage is overcharged about $9,000.

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  • In FY 2013 alone, nearly 200,000 home purchasers with FHA-insured loans could have saved an estimated $710 million over the life of their loans.

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  • In October, 14.70 percent of all FHA loans were delinquent, down from 14.97 percent in September 2013 and down from 16.57 percent in October 2012.

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This Issue’s Highlight

FHA’s Predatory Insurance Practices

The Federal Housing Administration’s (FHA’s) mortgage insurance practices qualify as predatory under the definition set out by the Federal Deposit Insurance Corporation (FDIC’s) inspector general. First, FHA mortgage insurance pricing grossly overcharges hundreds of thousands of lower-risk borrowers. Second, the FHA relies on a borrower’s lack of understanding of the complicated nature of FHA insurance as well as a borrower’s expectation that the FHA would not intentionally permit borrowers to be steered into financially disadvantageous transactions. Third, cross-subsidies allow the FHA to offer abusive loan insurance terms to hundreds of thousands of high-risk borrowers.

This Month’s Features

Spotlight on FHA’s Predatory Insurance Practices
FHA’s Mortgage Insurance Practices Qualify as Predatory under the FDIC Definition

Spotlight on Best Price Execution
Minor Changes over Last Month

Spotlight on Insolvency
FHA’s Private GAAP-Estimated Net Worth Declined to Lowest Level in Seven Months

Spotlight on Delinquency
Various Rates Experience Moderate Drop from September to October

 

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Edward J.
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