The Federal Housing Agency (FHA) 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 last week at the FHA: 80 Years and Counting – Regulatory Issues Forum during the REALTOR Party Convention & Trade Expo in Washington, DC.
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. On the average FHA loan balance of $180,000, these reductions can add up to nearly $9,800 in savings over the life of the loan.
All of the details of the HAWK for New Home Buyers pilot program will open to comment as part of Federal Register Notice so the final mortgage insurance premium (MIP) reductions may change based on those comments. 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 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. 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.
More information on HAWK is available here: