NAR is a strong supporter of the single- and multi-family programs administered by the Federal Housing Administration (FHA). The FHA single-family mortgage program has played an important and vital role in the mortgage marketplace. The FHA program has a public purpose obligation to provide mortgage insurance to American families who choose FHA to meet their homeownership needs. Increasing the capacity of FHA will insure it is a viable product for homebuyers and expands the pool of available safe and affordable loan products.
FHA's single family mortgage insurance program was created in 1934 to provide access to safe, affordable mortgage financing for American families. FHA does not lend money to homeowners. Instead, FHA insures qualified loans made by private lending institutions. Since 1934 FHA has made the dream of homeownership a reality for millions of American families.
During the economic recession and housing downturn, FHA has been one of the only sources of mortgage finance available, and they have weathered the storm well. While banks, lending institutions and private mortgage insurers went bankrupt or collapsed, FHA has been there. During the worst economic crisis of our time, FHA provided access to homeownership to more than 2.8 million first time homebuyers in the last four years.
Today, FHA continues to provide insurance and pay claims. A serves as a source of credit for millions of Americans who are underserved by the private market.
None at this time.
What is the fundamental issue?
The financial health of the Federal Housing Administration (FHA) Mutual Mortgage Insurance fund (MMI) continues to strengthen. FHA has made efforts to tighten credit standards, improve loss mitigation and eliminate programs such as the Seller Funded Downpayment Assistance Program. As a result, FHA is seeing higher quality books of business and improved delinquency and recovery rates.
The FY 2016 Actuarial Review of the MMI fund shows that it once again exceeded the congressionally required 2 percent capital reserve ratio, reaching 2.32 percent with the forward portfolio at 3.28 percent. The MMI fund gained $3.8 billion since FY 2015. Its economic net worth has improved by $43.9 billion since FY 2012.
I am a real estate professional. What does this mean for my business?
With the collapse of the private mortgage market, the importance of the Federal Housing Administration (FHA) has never been more apparent. FHA needs to serve its role to fill the gap and make mortgage insurance available to qualified homebuyers in all economic times.
NAR is a strong supporter of the single- and multi-family programs administered by the Federal Housing Administration (FHA). FHA is critical to our nation’s housing and economic recovery, and care must be taken to not hamper FHA’s ability to facilitate safe, affordable mortgage financing to American families.
During the Great Recession, FHA-insured financing was often the only product available. Moody’s analytics has reported that without FHA, housing prices would have dropped an additional 25 percent, and American families would have lost more than $3 trillion in home wealth.
FHA remains financially viable and a critical part of our nation’s economic recovery. Efforts must be taken to ensure FHA’s ability to facilitate safe, affordable mortgage financing to American families.
NAR continues to call for an elimination in the lifetime mortgage insurance premium and a reduction of the mortgage premiums. FHA’s current policy to maintain lifetime annual mortgage insurance premiums for loans with over 90 percent LTV at origination penalizes any homebuyer without the means to put down a larger down payment. This goes against the core of FHA’s mission, to provide fair homeownership opportunities to worthy borrowers who are overlooked by conventional lenders. FHA should eliminate this requirement. When FHA reduced the premiums in 2015, FHA added 75,000 borrowers with credit scores below 680 and the MMIF reached beyond the required 2.0 percent capital reserve ratio. We believe the health of the FHA fund is such that a further reduction is warranted.
As of January 1, 2017, the FHA loan limits have been raised slightly. In low-cost areas, the limit will now be $275,665 and the high cost limit is $636,150. To find your local median, visit: https://entp.hud.gov/idapp/html/hicostlook.cfm.
Federal Financing and Housing Policy Committee