Wednesday, May 12, 2010

CBO: FHA Reform Bill (HR 5072 ) Would Reduce Spending/Outlays by $2.5 Billion.

CBO cost estimate is HERE.
Under this legislation, the cap on annual premiums for the single-family program would increase from 0.55 percent to 1.55 percent of the loan balance. The average borrower currently pays a fee equal to 0.52 percent of the remaining balance on their mortgage to FHA. Based on information from FHA, CBO expects that under the bill, FHA would charge borrowers, on average, 0.88 percent of their loan balance amount annually. In addition, CBO expects that FHA would lower the up-front premium from 2.25 percent to 1 percent of the mortgage amount, though this action would not be required under this legislation. CBO estimates that those changes to the premium structure would change the estimated credit subsidy rate for the program from -0.4 percent to -0.8 percent. We estimate that under this revised premium structure, the volume of loan guarantees handled by FHA in 2011 would decrease slightly from $240 billion to $232 billion because the increase in the annual premium would deter some borrowers from participating in the single-family program. On balance, we estimate that the revised premium structure would increase offsetting collections (a credit against discretionary spending) from the program by $900 million in 2011, assuming the appropriation action to establish the 2011 commitment authority for the FHA single-family program.
House Report 11-476 on the bill on Thomas is HERE; bill status is HERE.

Originally created and posted on the Oregon Housing Blog.

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