Financial Schools Reviews

Consumers that have taken out mortgages that are guaranteed by the Federal Housing Administration may soon see an increase in their monthly fees.

In an effort to stabilize the FHA’s finances, which have been slowly withering in light of the nationwide foreclosure crisis, the House approved a bill that would allow the Administration to raise monthly premiums, the AP reported. Many of the mortgages backed by the FHA are for first-time homebuyers.

Though the House voted overwhelmingly, 406-4, to approve the bill, it was unclear whether the Senate would follow suit, the AP report said.

The FHA does not make loans, but rather offers insurance against defaults, and borrowers pay extra fees because these loans only require a down payment of 3.5 percent of the purchase price. The changes to these fees would allow the FHA to charge a borrower with a $170,000 mortgage an extra $42 a month, the AP said. Such an increase would net the agency an extra $5.8 billion in 2011.

A Reuters report on the bill said that the FHA is required by law to have the capital reserves to back 2.0 percent of the value of the mortgages it insures, but the mortgage meltdown has whittled the Administration’s actual reserves to just 0.53 percent.

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