(WASHINGTON, DC) -- In the midst of a constantly changing real estate regulatory environment, the National Association of Realtors has recently urged Congress and the Obama administration to move cautiously before making changes to the Federal Housing Administration program that has served the needs of millions of American families for more than 75 years without needing a federal appropriation.
FHA remains financially strong because it has taken steps to ensure solid underwriting standards and responsible lending practices, said Charles McMillan, NAR immediate past president, in testimony before the House Subcommittee on Housing and Community Opportunity a few weeks ago.
"As the leading advocate for housing issues, NAR believes that one of the best ways Congress can help strengthen FHA is to quickly consider and pass legislation that would make current loan limits permanent," McMillan said. "It's important to note that higher balance FHA loans perform better than lower balance ones. While some argue that higher balance loans put taxpayers at risk, such loans actually strengthen the program and reduce risk to the fund."
NAR strongly supports H.R. 2483, the "Increasing Homeownership Opportunities Act." Current FHA loan limits are as high as $729,750 in high-cost areas, and are set to expire at the end of the year and revert to lower amounts, greatly hindering the housing recovery process. A decrease of current limits would adversely affect 612 counties in 40 states and the District of Columbia.
Explaining that FHA has played an important role in the recent housing and economic crisis by filing the gap left by private lenders, McMillan said FHA insured almost 30 percent of single-family mortgages in 2009 and more than 50 percent of first-time buyer loans. "Historically, FHA's market share has hovered between 10 and 15 percent of all loans. And when the private market is strong enough to return, we welcome a reduced FHA market share," he said.
McMillan said NAR strongly opposes H.R. 3706 that would raise the FHA downpayment. "While that would increase an individual's investment in the home, it would not add a penny to FHA's reserves and would disenfranchise many FHA borrowers," he said.
NAR also opposes a new FHA initiative that increased the up-front mortgage insurance premium (MIP) from 1.75 percent to 2.25 percent because it adds to the closing costs home buyers already face. NAR supports legislation to reasonably increase the annual MIP to replace FHA capital reserves, but in turn, FHA should reduce the up-front premium due at the closing table.
McMillan said NAR was also concerned that FHA wanted to decrease seller concessions to 3 percent. Reducing seller concessions could put homeownership out of reach for many buyers, he said, because it could require buyers to pay more at closing.
McMillan applauded FHA's stepped up enforcement and oversight of lenders making FHA loans. In 2009, FHA removed approval of or suspended 274 lenders. "Realtors support adding more tools to help FHA protect borrowers and taxpayers," he said.