HUD Secretary Julian Castro was the witness at a contentious Feb. 11 hearing before the House Financial Services Committee entitled, “The Future of Housing in America: Oversight of the Federal Housing Administration”. Nearly all Members of the majority criticized FHA’s recent reduction in FHA premiums since FHA is not at the required 2% capitalization ratio.
Following the hearing, NAR President Chris Polychron spoke up in favor of the FHA’s decision to reduce premiums, saying, “After four years of increases, the fees had become so expensive that last year alone, roughly 234,000 creditworthy borrowers were priced out of the market.”
During the hearing, Democrats on the Committee praised the reduction, saying it will add new homeowners. But Republicans said they remain concerned about the financial strength of the FHA, especially in light of the $1.7 billion draw from the Treasury in 2013. Secretary Castro reminded the Committee that FHA has more than $40 billion in reserves and FHA has made many policy changes that have improved the health of the fund.
In his prepared statement, Polychron said, “Realtors® support safe lending practices based on strong underwriting requirements, and the Federal Housing Administration’s new prices encourage sustainable homeownership for creditworthy borrowers. FHA is not lowering its underwriting standards or luring irresponsible borrowers into homeownership, instead it is resetting its fees to appropriately balance anticipated risk while still making a profit to support its funds.