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Proposed Modernization Of Federal Housing Administration

WASHINGTON - In an effort to increase homeownership opportunity for many Americans, the Department of Housing and Urban Development announced a far-reaching proposal to modernize the Federal Housing Administration (FHA) and make it an important financing option in today's housing market.

Assistant Secretary for Housing- Federal Housing Commissioner Brian D. Montgomery presented the House Subcommittee on Housing and Community Opportunity with the FHA Modernization Act, a legislative proposal that would enable FHA to reach deeper into the pool of prospective borrowers. Many of these borrowers are currently willing to pay subprime rates to become homeowners because they believe they have no other option.

The FHA Modernization Act would:

• Create a new, risk-based insurance premium structure for FHA that would match the premium amount with the credit profile of the borrower
• Eliminate the current statutory three percent minimum down payment, reducing a significant barrier to homeownership
• Increase and simplify FHA's loan limits

"FHA was created during the Depression to stimulate the housing market at a time when homeownership simply wasn't a reality for most people," said Montgomery. "FHA has been able to help over 33 million families become homeowners since that time, but now it needs to be able to adapt to today's marketplace. A new, modern-era FHA would offer many hard-working Americans a variety of homeownership options that are safer and at a fair price."

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