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Friday, November 22, 2013

Are the FHA's Mortgage Insurance Practices Predatory?

The American Enterprise Institute (AEI) recently published an article by Edward J. Pinto entitled “FHA’s Predatory Insurance Practices”.

An excerpt is below:
The Federal Housing Administration’s (FHA’s) mortgage insurance practices qualify as predatory under the definition set out by the Federal Deposit Insurance Corporation (FDIC’s) inspector general. First, FHA mortgage insurance pricing grossly overcharges hundreds of thousands of lower-risk borrowers. Second, the FHA relies on a borrower’s lack of understanding of the complicated nature of FHA insurance as well as a borrower’s expectation that the FHA would not intentionally permit borrowers to be steered into financially disadvantageous transactions. Third, cross-subsidies allow the FHA to offer abusive loan insurance terms to hundreds of thousands of high-risk borrowers.

Read the full article by AEI.