The average American is on the hook for $1300 for the Fannie Mae and the Freddie Mac bailouts.
Keeping the FHA afloat has only required three billion.
FHA mortgages requires smaller downpayments and lower credit scores than regular mortgages. You’d think that they’d have higher mortgage default rates then than regular mortgages and you would be right.
So who’s on the hook for those mortgage defaults? The FHA aka the taxpayer.
The FHA has a lot of room to raise fees because for many would-be borrowers, the FHA mortgage is the only mortgage they can secure. So FHA can keep jacking up rates, fees and conditions. When you’re the only seller, you have market power.
The new fees won’t apply to those who already have FHA mortgage insurance but they will apply to those who are seeking to refinance FHA mortgages.
More prospective home buyers have been turning to the F.H.A. as other lenders tightened their requirements after the real estate market collapse in 2008. The agency does not make loans, but insures mortgages that meet its guidelines: people with credit scores of 580 or more can put down as little as 3.5 percent. As a result, the number of mortgages backed by the F.H.A. has ballooned, accounting for 40 percent of all new purchase mortgages in 2010, up from 4.5 percent in 2005, agency figures show.
“We want to be there for the marketplace as it is needed, but we are also trying to step back some and encourage the return of private capital,” Carol Galante, acting F.H.A. commissioner, said in announcing the increases.
The agency’s cash reserves have shrunk because of a sharp rise in borrower defaults, which raised concerns late last year that the F.H.A. could require a bailout if the market deteriorated further. But officials said that the increase in borrower fees would bring in about $1.25 billion during the rest of 2012 and through September 2013. The agency also expects to collect about $1 billion from the $26 billion settlement among 49 attorneys general, the Obama administration and the five biggest mortgage servicers. Taken together, officials said, that would put the agency on stronger financial footing.