FHA announces plan for greater credit access

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The Federal Housing Agency is taking steps to expand access to mortgage credit for underserved borrowers.

Department of Housing and Urban Development Secretary Shaun Donovan told a gathering of the National Association on Realtors May 13 that lending to potential buyers with lower credit scores has fallen dramatically in recent years, and announced a plan for greater consumer access to credit, through a new FHA housing counseling program that will launch later this year.

The four-year, two-phase pilot program, called Homeowners Armed With Knowledge or HAWK, will offer a 50 basis point reduction in the upfront mortgage insurance premium and a 10 basis point reduction in the annual premium at the time of loan origination to first-time homebuyers who complete the program.

Loans that remain in good standing will also receive reductions, which could add up to thousands of dollars in savings for homebuyers over the life of their loan.

“People deserve access to credit and the chance to buy a home when they are ready. We are excited about the potential impact HAWK will have on buyers,” said Donovan. “This is a win for the market, FHA, lenders, and borrowers.”

National Association of Realtors President Steve Brown said HAWK is a “step in the right direction, making mortgage credit available to more qualified homebuyers. Realtors urge FHA to quickly develop the program and make it available to homebuyers.

“We have many qualified homebuyers who need help now, and are being shut out of the market due to record high annual premiums and mortgage insurance for the life of the loan.”

Fees on FHA loans make up nearly 20 percent of a monthly mortgage payment, according to NAR estimates, and they make it more difficult for potential buyers to purchase a home.

Carol Galante, FHA commissioner, agreed that there are too many responsible, creditworthy buyers who are being shut out of the market.

“HAWK will allow for real savings and give better access to FHA for many individuals,” said Galante.

She said the program will also reduce lender and consumer risk and encourage greater use of counseling to help more families get in homes.

Donovan made his remarks May 13 during the Realtor Party Convention Trade Expo in Washington. D.C.


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