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| House Committee Passes FHA Reform Act |
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(May 4, 2007) --
The U.S. House Financial Services Committee on Thursday passed legislation allowing the Federal Housing Administration to offer borrowers a safer alternative to risky mortgage products and to help many home owners facing foreclosure.
The NATIONAL ASSOCIATION OF REALTORS®, a strong advocate of FHA modernization legislation, says the bill will bring about more stability to local real estate markets and economies.
“FHA can once again be a leader in providing safe loan products and preventing foreclosures by authorizing lenders to assist borrowers who are in default," says NAR President Pat V. Combs. "This ability will make a substantial difference for many families that may otherwise face foreclosure."
The legislation — titled the Expanding American Homeownership Act of 2007 — would increase loan limits, eliminate the statutory 3 percent minimum cash down payment, and give FHA flexibility to provide risk-based pricing. The bill will next go before the full House of Representatives for a vote.
What the Bill Would Do
NAR also supports the continued availability of FHA loss mitigation programs, which includes mortgage modifications that allow borrowers to change the terms of their mortgage so that they can afford to stay in their home. The program also offers “partial claim” programs through which FHA lends money to a borrower to cure a loan default. This no-interest loan is not due until the property is sold or paid off.
“In 2004 alone, more than 78,000 people were able to retain their home through FHA's loss mitigation program, and two years later nearly 90 percent of these families are still in their home," Combs says. "That's what I'd call really making a difference."
Boosting FHA mortgage loan limits will help first-time home buyers, minority buyers, and others who cannot qualify for conventional mortgages. Increasing loan limits will also help people living in high cost areas because the current low FHA limits make FHA unusable in those areas. Eliminating the 3 percent minimum down payment will also have positive results for many home buyers.
“The universal and consistent availability of FHA loan products is the principal hallmark that has made mortgage insurance available to individuals during periods of prosperity and economic depression,” Combs says. “The FHA program makes it possible for higher risk, yet credit-worthy borrowers to get prime financing.”
— REALTOR® Magazine Online |
| Reprinted from REALTOR® Magazine Online (http://www.realtor.org/realtormag) May 2007 with permission of the NATIONAL ASSOCIATION OF REALTORS®. Copyright 2007. All rights reserved. |
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