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Nearly 8 in 10 Americans Support Bill To Provide a Safe Alternative To High Cost Subprime Mortgages

Minorities, first-time homebuyers and families in high-cost areas strongly support FHA modernization, new survey shows

WASHINGTON - Nearly 80 percent of Americans support legislation that would promote and protect the dream of homeownership by providing a safer, fairer and more affordable mortgage alternative to high-cost subprime loans, according to a new survey released by Wells Fargo today. Speaking at the Wells Fargo Housing Symposium, U.S. Housing and Urban Development Secretary Alphonso Jackson said the survey demonstrates the urgent need for Congress to pass legislation that would modernize HUD's Federal Housing Administration (FHA) and help hundreds of thousands of borrowers find an exit strategy from their exotic subprime mortgage loans that could ultimately result in foreclosure.

Secretary Jackson acknowledges Helen Jean Burn, 81 years young who received an FHA reverse mortgage."Americans want financially sound options...real choices," Jackson said during his speech highlighting the importance of National Homeownership Month. "Americans are in support of an FHA that could help even more first-time homebuyers and people with moderate incomes have access to safer mortgages. This survey demonstrates the urgent need for Congress to pass legislation that modernizes the FHA to help both promote and protect homeownership."

Jackson added that he believes the housing market is making a needed correction and will have a bright future. "The housing market can, and will, continue to grow. After all, homeownership stands near the all time high...at historic levels. Nearly 70 percent of all American families own a home. We should view that fact with pride. But there is work to be done. If we are going to stimulate growth in the housing market we will have to wisely engineer some important changes" - including a modernized FHA, Jackson said.

When presented with a brief description of The Expanding American Homeownership Act of 2007, legislation that would modernize FHA, the Wells Fargo survey found that 77 percent of Americans agreed that an improved FHA would be welcome so that more first time homeowners and people with moderate incomes would have access to mortgage loans with reasonable terms.

FHA was created in 1934 during the Depression to stimulate the housing market. Over the past 73 years, FHA has helped 34 million families become homeowners. However, as the mortgage industry has changed in recent years, FHA's products and practices have not had the ability to adapt to evolving lending practices without Congressional legislation. Many traditional FHA borrowers, with less-than-perfect credit and little money for a downpayment, have turned to high-cost, risky loan products, especially subprime loans, because FHA's loan limits are too low and the downpayment requirement is too stringent.

Borrowers who took out subprime loans in 2005 and 2006 have begun to experience increased payments. An estimated 80 percent of subprime loans are sound, but the other 20 percent may be headed for trouble. Many of these borrowers are having, or will have, difficulty affording their new higher payments.

The Wells Fargo survey found overwhelming support for the FHA reform legislation from Americans near the average age of a first time homebuyer. According to the survey, 83 percent of Americans between the ages of 25 and 34 favor the legislation. The National Association of Realtors reported that last year 43 percent of first-time homebuyers purchased their homes with no downpayment. Traditionally, first time homebuyers have sufficient income to make the mortgage payment, but may lack sufficient funds for a downpayment. By eliminating the current three percent downpayment requirement for an FHA-insured loan and instead offering low downpayment options, the legislation would allow FHA to help more first time borrowers reach their goal of homeownership.

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