Higher monthly fees may be in the works for consumers who take out home loans guaranteed by the Federal Housing Administration, the primary source of mortgages for first-time homebuyers.
The House on Thursday approved a bill giving the FHA power to hike monthly premiums it charges to consumers. The vote was 406-4, but it was unclear whether the Senate would follow.
Officials say the agency needs to do so to stabilize its finances, which have deteriorated because of the foreclosure crisis.
The agency does not make loans, but offers insurance against default. Borrowers pay extra fees because FHA-backed loans require down payments of only 3.5 percent of the purchase price.
Under changes being considered by FHA officials, a borrower with a mortgage of $170,000 would pay an extra $42 a month. The fees would bring in $5.8 billion in new revenue for the agency next year.
“It’s going to cost everybody a little more money,” said David Stevens, the agency’s commissioner. The agency, he said, “was never meant to be, nor should it be a bailout program. It should stand on its own two feet.”
The changes are expected to reduce the number of mortgages the agency backs annually by about 7 percent from the current level of around 1.8 million loans a year, Stevens said.
The potential changes, however, are likely to make it harder for marginal borrowers to qualify for loans, said Rhonda Porter, a loan officer with Mortgage Master Service Corp. in Seattle.
“It’s going to impact the person who might want to buy a little bit more than they were originally approved for,” she said. “There’s going to be less wiggle room.”
After the housing market went bust, the FHA became the major source of funding for first-time homebuyers. The agency insured roughly 24 percent of new loans in the first quarter of this year, according to Inside Mortgage Finance, a trade publication.
While the agency has avoided a taxpayer rescue so far, its reserves have sunk below the minimum level required by Congress.
Earlier this year, the FHA raised the fee paid by borrowers at the start of a loan to 2.25 percent of the total mortgage amount. Agency officials want to lower the upfront fee to 1 percent, but raise monthly fees.
Borrowers currently pay 0.55 percent of the total loan amount every year, divided into monthly installments. FHA officials want to raise that fee to 0.9 percent, though the bill would give them the power to hike it as high as 1.5 percent.