Printer Friendly

NAR RESPONDS TO KEMP'S TESTIMONY ON THE FEDERAL HOUSING ADMINISTRATION

 NAR RESPONDS TO KEMP'S TESTIMONY
 ON THE FEDERAL HOUSING ADMINISTRATION
 WASHINGTON, March 19 /PRNewswire/ -- Following is a statement by Dorcas T. Helfant, president of the National Association of Realtors (NAR), in response to testimony on the Federal Housing Administration (FHA) presented today by U.S. Department of Housing and Urban Development (HUD) Secretary Jack Kemp.
 HUD Secretary Kemp has painted a bleak picture of FHA in an attempt to justify drastic changes that are gutting the social purpose of the program.
 It seems HUD would have us believe that the constraints imposed on FHA are necessary to save the program from financial ruin. To the contrary, we feel these so-called reforms are the very factors contributing to the demise of FHA.
 New limits on the amount FHA borrowers can finance were mandated by the National Affordable Housing Act of 1990. The law limits FHA mortgages to 97.75 percent of the value of properties appraised for more than $50,000, and 98.75 percent of the value of properties below that amount. This change was made in an attempt to force borrowers to have more equity in their homes, reduce the likelihood of loan default, and in turn, reduce the risk to FHA's single-family mortgage insurance fund. However, HUD did not wait for this change, which took effect in February 1991, to be assessed before imposing its own additional restrictions. Last July, the department limited the amount of closing costs that can be financed to 57 percent.
 We now have evidence that adding the closing cost restriction to the revised down payment requirement has caused FHA to steadily lose business. Between the first and second half of 1991, markets across the nation experienced a notable falloff in FHA activity. For instance, in Milwaukee, FHA use declined 39 percent; in Oklahoma City, FHA's share dropped 32 percent. In Orlando, Fla., use fell 26 percent; and in Las Vegas, it fell 25 percent.
 Moreover, the drop in FHA's market share has occurred during a period of extremely low mortgage rates -- a time when private mortgage insurance companies and the Department of Veterans Affairs experienced notable increases in activity. FHA could be contributing to the housing rally that is desperately needed to pull the economy out of the recession. But, it isn't.
 The combined effect of the closing cost restriction, along with the equity requirement, is forcing buyers to come up with more cash at settlement -- extra cash that people who seek to use FHA either don't have or don't want to spend. On a $65,000 home, a buyer could have to pay as much as $600 more at settlement; on a $100,000 home, a buyer could have to pay an additional $900. These added costs are definitely driving away people who can no longer afford FHA. However, FHA also is losing the people it needs, as well as the people who need it. The higher costs are turning away those who might have used FHA, but are switching over to conventional financing because it is less expensive for them to use. People who qualify for either FHA or conventional financing presumably would be considered low-risk borrowers who could offset some of the higher-risk borrowers using the program. FHA cannot afford to lose this segment of buyers. Rescinding the closing cost restriction is one way to bring buyers back to FHA, and help it regain some of the market share it has lost. Another step that should be taken is to adjust FHA's mortgage insurance limit to reflect local housing costs.
 The current limit, $124,875, renders FHA virtually useless in areas where home prices are typically much higher. Basing the limit on local home prices would enable FHA to serve borrowers in more areas, as well as a wider range of borrowers. Broadening usage of FHA would strengthen it by making it less vulnerable to economic downturns in any one market or region. FHA's portfolio needs diversity to survive.
 HUD must realize that the important social purpose of FHA -- to make homeownership affordable -- does not need to be sacrificed in order to keep the program fiscally sound. There are ways to make FHA stronger that don't include shutting out the people it was created to serve.
 NAR, "The Voice for Real Estate," is the nation's largest trade association, representing more than 750,000 members involved in all aspects of the real estate industry.
 -0- 3/19/92
 /CONTACT: Trisha Morris, 202-383-7560, or Lois Clinton, 202-383-1016, both of National Association of Realtors/ CO: National Association of Realtors ST: District of Columbia IN: SU: ECO


MK-SB -- DC023 -- 9731 03/19/92 13:28 EST
COPYRIGHT 1992 PR Newswire Association LLC
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Publication:PR Newswire
Date:Mar 19, 1992
Words:772
Previous Article:WASHINGTON CITIZENS FOR WORLD TRADE: EXPORT GROUP URGES FOCUS ON FEDERAL FOREST RESTRICTIONS, CALLS CHANDLER-GORTON BILL 'UNNECESSARY'
Next Article:SWISSAIR SALUTES THE NEW SEASON WITH SPECIAL ECONOMY FARES
Topics:


Related Articles
BUSH'S TAX PROPOSALS MUST GO FURTHER TO RESTORE FAIRNESS, NAR SAYS
NATIONAL ASSOCIATION OF REALTORS SAYS KEEPING FHA ACCESSIBLE MUST BE PART OF HOUSING REAUTHORIZATION BILL
NAR RECOMMENDS HOUSING POLICY TO PARTY PLATFORMS/PEROT CAMPAIGN
NAR/HUD RENEW FAIR HOUSING COMMITMENT
NAR CHAMPIONS REAL ESTATE ISSUES AT PRESIDENTIAL CONVENTIONS
National Realtors make proposals to candidates.
THIRD-QUARTER HOME RESALES RISE IN 35 STATES, NAR REPORTS
CLINTON HOUSING/REAL ESTATE TAX PACKAGE SHOULD BE ENACTED, NAR TESTIFIES
REAL ESTATE MUST BE PART OF NEW LEGISLATIVE AGENDA: NAR

Terms of use | Copyright © 2016 Farlex, Inc. | Feedback | For webmasters