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REALTOR®: Realtors welcome proposed FHA changes

FHA changes would make housing more affordable in California

Monday, September 17, 2007

The National Association of REALTORS® (NAR) and the San Mateo County Association of REALTORS® (SAMCAR) support Federal Housing Administration policy changes recently proposed by Congress because they believe if changes are made, more individuals and families will be able to achieve the American dream of owning a home, especially in high-cost areas like California.

NAR commended Senate Banking Chairman Christopher Dodd, D-Conn., Sen. Mel Martinez, R-Fla., and Sen. Richard Shelby, R-Ala., for their demonstrated leadership in protecting the interests of America’s current and future homeowners by passing FHA reform legislation.

"The Senate Banking Committee's passage of the Building American Homeownership Act of 2007 will offer home buyers a safer alternative to riskier mortgage products and will help many homeowners who may be facing foreclosures," said NAR President Pat V. Combs. "As the leading advocate for expanding homeownership opportunities and protecting consumers in the real estate transaction, NAR applauds this progress."

"As adjustable subprime loans reset, some homeowners are faced with payments they can no longer afford," said Combs. "A reformed FHA is positioned to provide a safer mortgage alternative for borrowers and help bring stability to local markets and economies."

Realtors have long supported FHA modernization legislation that would increase loan limits, reduce or eliminate the statutory 3 percent minimum cash down payment, allow FHA increased flexibility and give the agency the ability to streamline certain programs, in addition to strengthening its loss mitigation program.

Realtors believe FHA modernization should include increasing loan limits, eliminating or reducing the amount of cash down payments required for FHA loans, establishing risk-based pricing, revising prepayment penalty regulations, and increasing loss mitigation efforts. NAR also supports separate legislation to abolish the mortgage cancellation tax that consumers are hit with when their mortgage is forgiven by their lender.

Despite the successes of the FHA program, too many potential homeowners in underserved populations and high cost areas like California continue to be excluded from the American dream of owning a home. FHA’s market share has dwindled because its loan limits, inflexible down payment requirement, and fee structure have not kept pace with the current mortgage marketplace.

"FHA can once again lead the way in providing safe loan products and preventing foreclosures by authorizing lenders to help borrowers who are in default. This will make a substantial difference for many families that may otherwise face foreclosure," Combs said.

NAR is especially pleased with the increase in FHA mortgage loan limits. "This will help first-time home buyers, minority buyers, and others who could not qualify for conventional mortgages. Increased loan limits will also help people living in high-cost areas, because low FHA limits currently make FHA-insured mortgages unavailable to many of these families," said Combs.

"The universal and consistent availability of FHA loan products has made mortgage insurance accessible to individuals regardless of their race, ethnicity or social status during periods of prosperity and economic depression, allowing higher risk, yet creditworthy borrowers to get prime financing. A strong and viable FHA is important to a robust and vital housing market,” Combs said.

The Senate Banking Committee took quick action in passing this important legislation, a day after the full House passed FHA reform legislation. H.R. 1852, “Expanding American Homeownership Act of 2007,” seeks to modernize and update the National Housing Act and enable the Federal Housing Administration to use risk-based pricing to more effectively reach underserved borrowers, and for other purposes.

The House by voice vote also adopted an amendment offered by Representative Dennis Cardoza to raise the FHA single family loan limit, by establishing such limit in each area as the lower of (a) 125 percent of the local median area home price or (b) 175 percent of the national GSE conforming loan limit; retain the FHA loan floor provision in the reported bill of 65 percent of the GSE conforming loan limit; and also gives HUD authority to raise these resulting loan limit amounts by up to $100,000 by area and/or by unit size “if market conditions warrant.”

H.R. 1852 modernizes the FHA mortgage insurance program, once again providing American homeowners with safe, affordable mortgage alternatives.

The bill would 1) increase the FHA loan limits nationwide and in high cost areas; 2) eliminate the 3 percent down payment requirement on FHA loans for first time homebuyers; 3) extend the loan term to 40 years; 4) allow FHA to risk-base price their products; 5) eliminate the cap on the number of reverse mortgages that FHA can insure; and 6) streamline usage of the FHA condominium loan program. It would also allow excess FHA funds to be put into an affordable housing fund, rather than go to the US Treasury.

Realtors are hopeful that both Houses of Congress will meet soon to finalize and enact FHA reform this year. Without reform, FHA would remain unavailable to many homebuyers or those needing to refinance. FHA products are safe, thanks to appropriate underwriting and loss-mitigation programs, and fairly priced without resorting to teaser rates or negative amortization.

The San Mateo County Association of REALTORS® (SAMCAR) is a professional trade organization representing over 3,800 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula. SAMCAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in San Mateo County.

The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.

Variations of this article have appeared in local area newspapers.

For further information, please contact Julie Ziemelis, Director of Public Affairs, e-mail , or phone (650) 696-8214.

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