FHA Reforms Needed to Spur Homeownership Opportunities
To help spur housing opportunities for America’s working families, the nation’s home builders on April 5 called on Congress to support the Bush Administration’s efforts to reform and revitalize the Federal Housing Administration's single-family mortgage insurance programs.
Testifying before the House Financial Services Committee's Housing and Community Opportunity Subcommittee, Jerry Howard, NAHB’s executive vice president and CEO, said that statutory and regulatory constraints have limited the FHA’s ability to respond to the needs of borrowers.
“All too often, the differences between the FHA’s requirements and those for conventional mortgages have been viewed by lenders, appraisers and others as a disincentive to use FHA programs,” said Howard. “And FHA’s unique and often burdensome requirements have caused many home builders to avoid using its programs to build homes that otherwise would have been well-suited to borrowers who planned to use FHA-insured mortgage loans.”
Howard added that important strides have been made to revitalize the FHA under the stewardship of FHA Commissioner Brian Montgomery, who assumed his office last June.
“Acting with the support of HUD Secretary Alphonso Jackson, Commissioner Montgomery’s efforts are already being realized as the FHA has aligned its appraisal requirements by eliminating needless paperwork requirements,” Howard said. “Other steps that have made the program more user-friendly are the FHA’s new policies that increase the allowable loan-to-value ratio for cash-out refinancing transactions and revisions to the 203(k) rehabilitation program.”
Despite these positive changes, Howard told lawmakers that FHA’s loan structure and downpayment requirements, which are established by Congress, seriously limit its ability to deliver the range of mortgage products that are needed to fulfill its housing mission.
“To meet the needs of unserved and underserved families who desire to purchase a home, NAHB believes that Congress should grant the FHA broader authority outlined in the Administration’s fiscal 2007 budget proposal and detailed in draft authorizing legislation,” said Howard.
Specifically, NAHB is urging Congress to take the following actions:
- Increase the current limit for FHA-insured mortgages to enable deserving potential home buyers to buy homes in high-cost areas. NAHB supports the Administration’s proposal to recalibrate local loan limits at 100% of the area median up to the Fannie Mae/Freddie conforming loan limit and to increase the minimum FHA mortgage amount to a more meaningful level.
“Boosting these limits would allow more working families to utilize FHA mortgage programs to finance their home purchases,” said Howard.
- Grant the FHA flexibility to establish downpayment requirements for its single-family programs as long as they are operated on an actuarially sound basis. NAHB supports H.R. 3043, which would establish a zero downpayment pilot program, as well as other reduced-downpayment mortgage options to more fully address market needs.
- Allow the FHA to establish a risk-based mortgage insurance premium pricing structure.
- Permit the FHA to extend the maximum loan maturity to 40 years to enable borrowers to reduce their monthly mortgage payments.
- Revise the FHA’s requirements for condominium loans, which are often burdensome and differ significantly from mortgage loans that are secured for detached single-family homes. “In many communities condominiums represent the most affordable path to homeownership,” said Howard. “NAHB is pleased that the Administration has requested to consolidate all of the single-family mortgage insurance programs under one section of the National Housing Act.”
To read H.R. 3043, click here and enter the bill number in the box at the center of the page.
For more information, e-mail Michael Strauss at NAHB, or call him at 800-368-5242 x8252.