WASHINGTON May 13 The Obama administration will
reduce the fees it charges first-time home buyers for government
backing of their mortgages as long as they undergo counseling
when they purchase a home, a top official said on Tuesday.
An increase in interest rates has weighed on the U.S.
housing market in recent months, and policymakers are looking
for ways to improve access to credit.
Taxpayers are on the hook for about $1 trillion in mortgages
backed by the Federal Housing Administration, but Housing and
Urban Development Secretary Shaun Donovan said counseling can
reduce the chances that first-time buyers fall behind on
"It helps ensure that we are dealing with responsible
buyers," Donovan told a realtors convention.
While the government has raised its fees for backing
mortgages since a home lending boom and bust helped trigger the
2007-09 recession, Donovan said the FHA this fall would dial
back its fees for first-time buyers who commit to counseling
when applying for their loans.
The FHA, which doesn't directly lend money but guarantees
about a third of all new U.S. mortgages, will reduce fees
further for buyers who also undergo further counseling after
closing on their homes and go two years without falling behind
Cheaper mortgages could help many home buyers get into the
market, which has slowed sharply since the Federal Reserve last
year signaled it would reduce its support for the economy.
That pushed interest rates higher for new mortgages. The
pace of sales for existing homes fell by 15 percent in the eight
months through March, according to data from the National
Association of Realtors.
"Before the crisis, credit was too easy to get. Now it is
too difficult," Donovan said in prepared remarks. "We've been
taking a long look in the mirror to see what we can do to
increase the flow of credit."
Home buyers could save $10,000 over the life of their loans
under the program, Donovan said.
He didn't say whether the program would cost taxpayers
money, though he said research has shown counseling can reduce
delinquencies by about 30 percent for first-time buyers. If
fewer borrowers fell behind on their government-backed loans,
taxpayers would not have to pay lenders as much to cover the bad
(Reporting by Jason Lange; Editing by Andrea Ricci)