Dan Dressman over at the Cincinnati Inquirer recently wrote this review of the recent changes in government refinancing assistance programs:
The recent ½ percent drop in the Federal Reserve discount rate is a sign that the federal government is bullish about improving consumer confidence in the housing market.
Another sign came a few weeks ago when the House of Representatives passed H.R. 1852, the American Homeownership Act.
Allowing more flexibility in the Federal Housing Administration (FHA) program to address changes in the marketplace is the hallmark of this comprehensive legislation. Some of the key provisions include higher loan limits for high-cost areas, elimination of the 3-percent-down payment requirement, simpler condo loans and expanded use of reverse mortgages.
The legislation also permits the FHA to change the terms of a loan to prevent a foreclosure.
Created in 1934, the FHA has made it possible for millions of people to purchase a home through government-guaranteed, low-interest mortgages.
Nevertheless, many believe that over the years the FHA has failed to keep up with changes in the market. Consequently, FHA’s share of the market fell from 18 percent in 1990 to less than 4 percent in 2006.
FHA’s descent lengthened in the latter stages of that period as competing sub-prime mortgage loan programs lured many borrowers into less advantageous mortgages.
All combined, the changes approved by the House, and similar measures expected in the Senate, will allow the FHA program to play a stronger role in stabilizing mortgage markets. The FHA mortgage finance program will continue to provide borrowers with a safe and fair mortgage alternative to conventional financing.
Now it’s imperative that the full U.S. Senate pass similar legislation, which President Bush has indicated he will sign into law. On Sept.19, the Senate Banking, Housing & Urban Affairs Committee passed its FHA Modernization Act of 2007. Tristate Senators Jim Bunning (R-Ky.), Evan Bayh (D-Ind.) and Sherrod Brown (R-Ohio), all members of the committee, supported the measure. The full Senate is expected to act soon on this bill.
