RISMedia's Real Estate Magazine

MAR 2017

Real Estate magazine is the industry's leading source for real estate news and information since 1980. Published monthly by RISMedia, Real Estate magazine offers timely and relevant real estate news to the industry's top brokers and agents.

Issue link: http://remag.rismedia.com/i/790164

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Page 19 of 118

RISMedia's REAL ESTATE March 2017 15 {Policy Matters} T he Federal Housing Admin- istration (FHA) was formed in the aftermath of the Great Depression to cre- ate a stable mortgage market and support homeownership. Decades later, the Department of Housing and Urban Development (HUD) was established through the Civil Rights Act of 1968 to ensure Americans have access to affordable hous- ing. With the collapse of the private mortgage market and our nation's ongoing economic recovery follow- ing the Great Recession, the im- portance of HUD has never been more apparent. Care must be taken to protect FHA's ability to facilitate safe, affordable mortgage financing to American families. 1 Reduce mortgage insurance premiums and eliminate the life-of-loan mortgage insurance premium. FHA mortgage insurance premiums have reached historically high rates. After the recession, FHA raised premiums to shore up its capi- tal reserves, but the current strength of the FHA fund demonstrates that premium changes should be re-ex- amined. FHA should also eliminate the requirement that borrowers pay mortgage insurance for the life of the loan. Once a borrower reaches 78 percent LTV, there is sufficient equity in the home that even if the homeowner eventually defaults, the value of the home in combination with the premiums paid in advance will cover any losses to the Mutual Mortgage Insurance Fund. Congress understood this principle and en- acted the Homeowners' Protection Act in 1999, which requires lenders to automatically cancel private mort- gage insurance for borrowers who achieve sufficient equity. Why should FHA borrowers be denied the same relief from excess insurance? FHA should reduce mortgage insurance premiums and reinstate cancellation of annual mortgage insurance premi- ums for all borrowers that reach 78 percent LTV. This will reduce borrow- ers' monthly payments and provide them with more cash to better with- stand economic shocks and reduce defaults. 2 Implement changes to FHA condominium approval pro- cess. Condominiums are often the most affordable homeownership op- tion for first-time buyers, small fami- lies, single people, urban residents and older Americans. Unfortunately, current FHA regulations prevent buy- ers from purchasing condominiums, harm homeowners who need to sell their condominiums, and limit the ability of condominium projects to attract resident buyers. Recogniz- ing these difficulties, FHA issued a proposed rule last fall that offers changes to the condominium ap- proval process. While a good first step, FHA must issue a final rule and offer additional policy changes. NAR supports the re-introduction of spot loans without restrictive quali- fications and further easing of the condominium project re-certification process. NAR urges FHA to increase the allowable commercial space in a project and reduce the required percent of owner-occupants, open- ing up many more condominiums to worthy buyers. 3 Affirmatively further fair hous- ing. The Fair Housing Act re- quires HUD to administer its pro- gram in a manner that affirmatively furthers fair housing. While the cur- rent regulation outlines an effective process for communities to address their unique fair housing issues, NAR expressed concerns that HUD, in some instances, proposed specif- ic policies for local communities to adopt, and did not give enough time for full public participation in the process. When communities receive HUD housing and community de- velopment funding, HUD must take steps to ensure communities are ad- dressing fair housing issues; howev- er, communities should develop fair housing strategies on a local level. NAR looks forward to working with the new administration to keep HUD and FHA strong and healthy, promoting homeownership across the nation. RE Sehar Siddiqi is a federal housing policy representa- tive for the National Association of REALTORS®. FHA Priority List: Policy Changes Critical in 2017 This column is brought to you by the NAR Real Estate Services group. by Sehar Siddiqi

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