The National Association of Realtors has joined other industry organizations advocating reform of the Federal Housing Administration’s single-family mortgage insurance program.

NAR President Thomas M. Stevens told the Senate Housing and Transportation Subcommittee Tuesday that the long overdue reform will provide home buyers with an affordable alternative to higher-cost loans and help bridge the gab in minority home ownership.

“FHA’s market share has dwindled because its loan limits, down-payment requirement and fee structure have not kept pace with the current mortgage marketplace,” said Stevens. As a result, a growing number of home buyers are deciding to use one of several new types of specialty mortgages, and FHA has become a lender of last resort, according to NAR.

FHA loans account for only 3 percent of the overall mortgage market, compared with about 12 percent in the 1990s.

On Monday, Sens. Jim Talent, R-Mo.; Johnny Isaakson, R-Ga.; Saxby Chambliss, R-Ga.; and Mel Martinez, R-Fla., introduced legislation that encompasses the reforms recommended by FHA.

The legislation includes increasing loan limits, eliminating the statutory 3 percent minimum cash investment and down-payment calculation, allowing for extended loan terms from 30 to 40 years, allowing FHA flexibility to provide risk-based pricing, moving the condo program into the 203(b) fund, and lifting the current owner-occupied requirement to qualify condominium units for FHA-insured mortgages.

“First-time home buyers, minorities and home buyers with less than perfect credit will continue to see fewer and fewer safe, affordable mortgage options, if the recommended reforms are not made to the FHA program,” said Stevens.

According to credit ratings service Moody’s Investors, more than a quarter of all existing mortgages come up for interest-rate increases in 2006 and 2007 when the term rate expires. While some homeowners may be prepared to make the new higher payments, the Realtor trade group worries that many will find it difficult, if not impossible.

NAR helped form a coalition aimed at advancing FHA reforms. Members of the coalition include the National Association of Home Builders, National Council of State Housing Agencies, National Association of Independent Mortgage Bankers/Lenders One, National Association of Hispanic Real Estate Professionals, National Association of Real Estate Brokers, National Association of Local Housing Finance Agencies, Asian Real Estate Association of America, and the Strategic Alliance for Mortgage Subsidiaries.


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