FHA Reform Legislation and FED Rate Cut Benefit Consumers
Washington, DC, Sept. 18, 2007 - Today is a good day for housing, noted the National Assn. of REALTORS. On the same day that the Federal Reserve cut the discount rate by half a percentage point, the U.S. House of Representatives has passed the Expanding American Homeownership Act of 2007, H.R. 1852. The legislation will offer home buyers a safer alternative to risky mortgage products and help many homeowners who may be facing foreclosure, and the combination of efforts could have a positive impact on the housing market and consumer confidence.
“NAR appreciates the efforts of House Financial Services Committee Chairman Barney Frank, D-Mass., and Rep. Maxine Waters, D-Calif., for their leadership in protecting the interests of America’s homeowners and those who strive to own their own home,” said NAR President Pat V. Combs, of Grand Rapids, MI., and vice president of Coldwell Banker-AJS-Schmidt. “While some homeowners are faced with mortgage payments they can no longer afford as their adjustable subprime loans reset, a reformed FHA is positioned to offer borrowers a safer mortgage alternative and help bring stability to local markets and local economies.”
“As the leading advocate for expanding homeownership opportunities, NAR has long supported FHA modernization legislation that increases loan limits, eliminates the statutory 3 percent minimum cash down payment, and gives FHA the flexibility to provide risk-based pricing. NAR also supports the continued availability of FHA loss mitigation programs,” said Combs. “We are pleased that this bill contains all of these important enhancements.”
FHA’s loss mitigation program includes mortgage modifications, allowing 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 in which FHA lends the borrower money to cure the loan default. This no-interest loan is not due until the property is sold or paid off.
“FHA can once again be a leader 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 who may otherwise face foreclosure,” Combs said.
Eliminating the 3% minimum down payment will help many buyers into homes, as will increasing FHA-insured mortgage loan limits, which will help first-time home buyers, minority buyers and others who cannot qualify for conventional mortgages. People who live in high-cost areas will benefit as well, since low limits currently preclude many of these buyers from using FHA-insured mortgages.
“NAR believes that the amendment offered by Chairman Frank, and Reps. Gary Miller, R-Calif., and Dennis Cardoza, D-Calif., truly represents a meaningful increase in loan limits, which will help strengthen and secure the mortgage market and make homeownership more attainable for many. We applaud their effort,” Combs said.
“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,” Combs said. “A strong and viable FHA is important to a robust and vital housing market. The House took the right step today, and we hope that the Senate will quickly follow suit.”
“Along with today’s FHA legislation, we believe that the Federal Reserve Board made the right move today in lowering the interest rate,” said Combs. “Making borrowing more affordable will make money more available, and this could go a long way in helping turn around the sluggish housing market.”