The Federal Housing Administration mortgage insurance program is a vital part of the American housing fabric and has never been more essential than it is in today’s market, according to NAR President Vicki Cox Golder.
Testifying before the House Committee on Financial Services, Golder stated that the FHA program is fiscally sound with responsible underwriting, and needs improvements not radical reform.
She asked Congress and the administration to make careful consideration before making changes to a program that has an intense impact on economic recovery and serves U.S. families.
“With the collapse of the private mortgage market, the importance of the FHA mortgage insurance program has never been more apparent. Thus far in 2009, nearly 80% of all FHA insured purchasers are first-time homebuyers. And if you take a closer look at the numbers, you’ll see that program is doing exactly what it was designed to do – make more affordable mortgage financing available to homeowners,” said Golder.
She noted that this year nearly half of Hispanic borrowers used FHA insurance or the Veterans Administration’s loan guaranty for home-purchase loans and 21% used the FHA or VA program to refinance a home loan.
In 2008, over 60% of home purchase loans and around 45% of refinance loans to African-American homebuyers were insured or guaranteed by either FHA or VA.
“As the leading advocate for homeownership and housing issues, NAR knows that without FHA mortgage insurance, our housing market could never start to recover,” Golder said.
The FHA’s decline in reserves is partly a reflection of a forecasted change in home price values, and is not linked to extreme increases in defaults or unstable underwriting practices, she said.
In referencing the recent FHA audit, Golder said, “If FHA makes no changes to the way it does business today, the reserves will actually exceed 2% in the next several years. FHA has sufficient reserves.”
The agency has a combined asset total of $30.4 billion – a sufficient amount to pay all claims over a 30-year period.
“Realtors strongly believe that FHA is taking the necessary steps to assure its financial solvency,” Golder said.
“We look forward to working with the Department of Housing and Urban Development. We have confidence that FHA Commissioner Dave Stevens will do what’s needed to ensure the financial health and stability of the FHA fund. We encourage FHA to take steps that will have the least impact on FHA borrowers who are such an important part of our housing and economic recovery,” Golder stated.
NAR does not give support to the “FHA Taxpayer Protection Act of 2009,” which would increase FHA’s mortgage down payment requirement.
The agency sees the bill as adding nothing to FHA reserves and placing homeownership out of reach for many creditworthy borrowers who cannot come up with the extra funds.
“Realtors believe that the best way to ensure FHA’s success is to strengthen it,” Golder stated.
She also thanked Chairman Barney Frank (D-Mass.) and the committee for passing legislation to extend the higher loan limits through 2010, but requested that the committee make the higher limits permanent.
“The higher limits are not just for a few states with high median prices. There are currently 245 counties in 28 states that have high cost limits – this is a national issue,” she said.