Optics vs Reality Part 1

Optics vs Reality Part 1



Optics (what was said): Effective January 26 ^th the mortgage insurance premium on FHA loans was reduced 0.5%. In other words loan payments for new FHA borrowers will go down. The administration press release touted that the reduction will save the average borrower $900/year and will stimulate home purchases.



Reality (what was not said): Mortgage insurance premiums are used as insurance against FHA loans that have to be foreclosed on so any reduction in the rate makes those loans riskier. Anybody out there not remember the last time taxpayers got stuck with the bill for banks making bad home loans?



Statistically increasing the percentage of people owning homes stabilizes families, increases family wealth, and improves neighborhoods. It should be a primary goal of public policy, but only when it is done correctly and for the benefit of the people, not the politicians sending out press releases.