The National Association of Realtors (NAR) is calling on the Federal Housing Administration (FHA) to resist premium increases for FHA borrowers to raise money for the agency. The letter urges FHA to maintain current levels and continue to operate at no expense to taxpayers during “unprecedented times.’
“Today, NAR is seeing the majority of lenders in this country adding overlays and raising costs in response to concerns over borrower forbearance,” the letter, signed by NAR President Vince Malta, reads.
“These overlays are already stifling the real estate market, especially for first-time homebuyers and minority homebuyers,” Malta added. “Should FHA increase premiums, NAR believes that access to mortgage credit could become severely restricted for a much larger percentage of the potential homebuying population.”
FHA loans are insured by the U.S. Department of Housing and Urban Development, in exchange for an insurance premium charged to the borrower. Insuring the loans provides access to homebuying power for low and moderate-income borrowers.
The letter from HUD comes in the wake of an interview FHA Commissioner Brian Montgomery gave to American Banker, in which Montgomery would not rule out potentially raising premiums to mitigate risk to the agency’s insurance fund.
“We want to make sure that our cash [inflows] exceed our cash outflows, so again, we’re looking at a lot of different things, and premiums being one of them, but there are other things that we’re considering as well,” Montgomery told American Banker.
NAR, however, believes that raising premiums would do more longterm damage to the fund, rather than simply riding out the current period.
“As the Administration is already showing confidence in an opening up of the economy by summer, any potential losses to the fund could be quickly restored during what economists are predicting as a delayed homebuying season,” Malta said. “In its counter-cyclical role, FHA traditionally supports the housing market in times like these, ensuring that qualified first-time homebuyers, including low- to moderate-income households, are able to complete planned home purchases.”
“Now is not the time to raise premiums on FHA borrowers and turn this health care emergency into a housing crisis,” Malta added. “Home sales transactions can help buoy the economic recovery, but the mortgage market needs to continue to function as normally as possible to ensure there is access to affordable mortgage credit.”
The letter also calls on FHA to publish a mortgagee letter as soon as possible that definitively states that loans are still eligible for insurance, even if the borrower has requested forbearance after the loan has closed but before it has been insured.