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Will Increasing the FHA Monthly Mortgage Insurance Cause MORE Foreclosures?
Raising mortgage insurance premiums raises borrowers payments.
Anything that raises the payment also lowers the purchasing power of the buyer.
Lower purchasing power means sellers have to lower sales prices.
Lower sales prices means more sellers move into a negative equity position.
More sellers in a negative equity position means more short sales and foreclosures.
More short sales and foreclosures mean greater losses to banks and mortgage insurers.
More losses to mortgage insurers means they have to raise mortgage insurance premiums, which starts the process all over again.
 
I'm just a simple real estate practitioner and I hope my above logic is wrong.
I really do understand why taking in more premiums is essential to offset losses. Companies are scrambling to survive in this environment. Robust lenders and a strong FHA enables survival of the housing market.
How do you think the increased FHA mortgage insurance premiums will impact the market?
All opinions, whether agreement or dissenting are welcome.
 
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