Bill McCord's Blog

Rep. Maxine Waters [D-CA35] recently introduced H.R. 5072,The FHA Reform Act of 2010 which would impose hugely increased monthly payments on anyone buying a home with an FHA insured loan. This is a large majority of all 1st Time Buyers.

Already, effective from April 5th, the upfront Mortgage Insurance Premium was increased from 1.75% to 2.25%, (a 29% increase).

Now, in a further attack on the 1st Time Buyer, this misguided lady proposes a 300% increase on the ongoing monthly Mortgage Insurance payment.

To understand the impact of this consider a new $300,000 purchase with a 30 year fixed FHA loan.at 5.5% interest rate. The monthly payment will go from $1,804 up to $2,051. An increase of 12%.

Put another way; If the maximum you could qualify for was $300,000 before, it would now be only $270,000.

At one fell stroke this bill would eliminate an enormous number of willing buyers at the bottom end of the market.

When you consider that each 1st Time Buyer potentially creates a move up Buyer we can’t afford  this kind of interference in this very fragile recovery.