Posted on 8:19 AM by Unknown

The Downside to F.H.A. Loans

By LISA PREVOST

Mortgages insured by the Federal Housing Administration are the go-to product for borrowers who don’t have much cash for a down payment. But the required mortgage insurance premiums have become so costly that some critics argue that the agency is taking advantage of borrowers who have few other options.

One of the most vocal critics is Edward J. Pinto, a resident fellow of the American Enterprise Institute, who calls the terms “predatory” and “abusive.” He argues that the majority of F.H.A. loans are at high risk for default should the economy tip back into recession, but that borrowers have no way of knowing how safe their loans are, because the agency prices all loans the same.

Low-risk borrowers, he said, are overcharged to subsidize those at higher risk. “The consumer who has the very-low-risk loan doesn’t even know he might be better off going through the private sector,” Mr. Pinto said. “They may assume that the government is protecting their interests.” Rest of article: NYTimes.com The Downside to FHA Loans

Click here to read the full article www.nytimes.com/2013/12/08/realestate/the-downside-to-fha-loans.html?_r=1&adxnnl=1&adxnnlx=1386331942-y/fxAsLza8PnOltUpHjt3w&