FHA unveils blueprint to expand consumer access to credit through a new four-year, two-phase pilot housing counseling program that will be launched later this year

Allison Oesterle

WASHINGTON , May 13, 2014 (press release) – The Federal Housing Agency is taking additional steps to expand access to mortgage credit for underserved borrowers, according to Department of Housing and Urban Development Secretary Shaun Donovan, who spoke to Realtors® today at the FHA: 80 Years and Counting – Regulatory Issues Forum during the Realtor® Party Convention & Trade Expo.

Donovan said lending to potential buyers with lower credit scores has fallen dramatically in recent years and announced a new blueprint for greater consumer access to credit, through a new FHA housing counseling program that will launch later this year. The four-year, two-phase pilot program, called Homeowners Armed With Knowledge or HAWK, will offer a 50 basis point reduction in the upfront mortgage insurance premium and a 10 basis point reduction in the annual premium at the time of loan origination to first-time homebuyers who complete the program. Loans that remain in good standing will also receive reductions, which could add up to thousands of dollars in savings for homebuyers over the life of their loan.

“People deserve access to credit and the chance to buy a home when they are ready. We are excited about the potential impact HAWK will have on buyers,” said Donovan. “This is a win for the market, FHA, lenders, and borrowers. It will ensure that FHA will continue as a champion of opportunity for the next 80 years.”

During the meeting, National Association of Realtors® President Steve Brown congratulated FHA on serving millions of homebuyers for the past 80 years and safely providing access to mortgage financing, especially during critical times like the most recent economic downturn, and also into the future.

“HAWK is a step in the right direction, making mortgage credit available to more qualified homebuyers. Realtors® urge FHA to quickly develop the program and make it available to homebuyers,” said Brown, broker/owner of Irongate, Inc. Realtors® in Dayton, Ohio. “We have many qualified homebuyers who need help now, and are being shut out of the market due to record high annual premiums and mortgage insurance for the life of the loan.”

Fees on FHA loans make up nearly 20 percent of a monthly mortgage payment, according to NAR estimates, and they make it much more difficult for potential buyers to purchase a home.

Carol Galante, FHA commissioner and assistant secretary for housing, joined Donovan at the forum. She agreed that there are too many responsible creditworthy buyers who are being shut out of the market.

“HAWK will allow for real savings and give better access to FHA for many individuals,” said Galante. She said FHA’s blueprint to expand credit access will also reduce lender and consumer risk and will encourage greater use of counseling to help more families get in homes.

Galante also announced proposed changes to the agency’s quality assurance initiative, which will collect fees from lenders to conduct loan reviews to ensure lenders are following responsible lending guidelines.

“The quality insurance initiative will create solid rules of the road for lenders so they are more confident in how they lend to consumers,” she said.

Galante said FHA’s quality assurance measures will provide enhanced clarity and transparency in FHA’s lending policies and provide lenders with greater policy direction, which will encourage more consumer lending, especially to underserved borrowers. She said these changes will also better protect the FHA insurance fund, borrowers, lenders and taxpayers.

The notice of the program was published by FHA today. NAR will provide comments on the notice and looks forward to working with the Administration to help qualified homebuyers who are being shut out of the housing market.

Earlier today, Federal Housing Finance Agency Director Mel Watt announced a step-back from a planned reduction in mortgage loan limits for the government-sponsored enterprises Fannie Mae and Freddie Mac. Watt also said FHFA will be requesting input on guarantee fees and NAR plans to submit comments.

“Watt’s announcement is in line with NAR’s long held position that loan limits should not be lowered, so that borrowers in all markets don't experience a reduction in access to mortgage credit,” said Brown. “FHFA is taking additional steps to facilitate greater liquidity in mortgage markets and help more qualified buyers gain access to homeownership.”

For recaps of forums and the latest news from the conference, visit NAR’s Realtor® Party Live website pages, http://live.blogs.realtor.org/, and on Twitter, https://twitter.com/RPCTE.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1 million members involved in all aspects of the residential and commercial real estate industries.

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