Since its inception in 1934, the Federal Housing Administration (FHA) has played an innovating role in financing homeownership and affordable housing opportunities for all Americans, creating programs that serve those unserved or underserved by conventional products. The FHA accomplishes its mission through mortgage insurance programs at little or no cost to the government, and in fact annually sends funds to the U.S. Treasury, thereby reducing the deficit.
The mortgage market has changed dramatically over the past 15 years, creating what is today the world’s most sophisticated real estate finance system. This system has led to the highest rate of homeownership in U.S. history and to the efficient production of thousands of units of affordable rental housing each year.
While the mortgage market has changed significantly, FHA has not kept pace. FHA faces challenges in effectively managing its resources and programs in this quickly changing mortgage market. These challenges have already diminished FHA’s ability to serve its public purposes. Unaddressed, these issues will cause FHA to become less relevant and will leave the families served by their programs with no alternative for homeownership or affordable rental housing.
Even with the world’s most sophisticated real estate finance system, there is still much work to do. Minority families’ homeownership rates lag those of non-minority families. In many cities, the average fireman or teacher cannot afford the rent on a 2-bedroom apartment in the communities in which they work. FHA needs reform to be able to serve more American families.
Below are the major provisions in the bill:
- Loan Limits: Increases FHA maximum loan limits to reflect today’s housing market.
- Downpayment: Eliminates FHA’s three percent minimum cash investment requirement and downpayment calculation.
- Loan Terms: Increases the maximum loan term from 30 years to 40 years.
- Mortgage Insurance Premiums: Eliminates the 2.25 percent upfront and .55 percent annual premium caps allowing FHA to raise or lower the premium to match the borrower’s risk and eliminates the annual FHA premium charge after five years and 22 percent of property equity is received.
- Condominiums: Revises the definition of mortgage to insure condominiums as a single family unit rather than a multifamily project.
- Reverse Mortgages: Changes Home Equity Conversion Mortgage (HECM) requirements by eliminating the FHA cap on the number of loans that can be insured and sets a national loan limit at the GSE conforming rate so that all seniors have equal access to their equity.
- Manufactured Housing: Eliminates the portfolio insurance feature from the program and increases the loan limits to reflect the real cost of current manufactured housing.
Take Action on this Matter by Visiting the MBA’s Mortgage Action Alliance Web Page Simply visit www.capitolconnect.com/mbaa. You may need to register. To easily take action, forward the article and contact your Senators, click on the FHA Reform article (same article name as shown above), then scroll down to the Action Needed and Instructions section.
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