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NATIONAL ASSOCIATION OF REALTORS SAYS KEEPING FHA ACCESSIBLE MUST BE PART OF HOUSING REAUTHORIZATION BILL

 NATIONAL ASSOCIATION OF REALTORS SAYS KEEPING FHA ACCESSIBLE
 MUST BE PART OF HOUSING REAUTHORIZATION BILL
 WASHINGTON, April 7 /PRNewswire/ -- Provisions to restore the accessibility of the Federal Housing Administration's (FHA) single- family mortgage insurance program must be part of legislation to reauthorize programs included in the National Affordable Housing Act (NAHA), according to the National Association of Realtors (NAR).
 Stephen R. Casper, chairman of NAR's housing and community development subcommittee, discussed the reauthorization bill today during a hearing before the U.S. House housing subcommittee, which is part of the House Banking Committee. The NAR subcommittee is part of the Realtors' Legislative Committee.
 Casper urged subcommittee members to rescind existing FHA restrictions that are making the program more costly for home buyers to use. Specifically, he said the limit on closing costs that can be financed should be removed, because it is causing FHA to lose business. Last July, the U.S. Department of Housing and Urban Development (HUD), which oversees FHA, limited the amount of closing costs that can be financed to 57 percent. The restriction was made in an attempt to build up reserves in the single-family mortgage insurance fund. It was imposed in addition to new limits on the amount FHA borrowers can finance, which were mandated by NAHA when it was enacted in 1990.
 "HUD exceeded the intent of Congress when it implemented the restriction on closing costs. The statutory provisions in NAHA should have been given ample opportunity to work before further restrictions were imposed," Casper said. HUD's restriction has added hundreds of dollars to the upfront costs borrowers must pay at settlement. As a result, borrowers who cannot afford other types of financing have been closed out of FHA; and borrowers who can qualify for conventional financing are using it instead of FHA, he explained. According to NAR research, housing markets across the nation experienced a significant drop in FHA activity after the closing cost restriction took effect last July.
 In addition to rolling back the closing cost limitation, Casper said another way to boost FHA use would be to restructure the program's mortgage insurance premium system. Under a structure in place since the mid-1980s, borrowers who prepay their FHA loans receive a refund of the premium paid to FHA at settlement. This has resulted in excessive refunding, drastically cutting the program's insurance fund reserves. NAR believes FHA should reinstate the "pay- as-you-go" system it formerly used. The association supports charging a lower upfront premium that is non-refundable, along with an annual premium of 0.5 percent, he said.
 Casper also recommended that the housing reauthorization legislation include a measure to raise FHA mortgage insurance limits to more accurately reflect local housing costs. The maximum loan amount FHA will insure, $124,875, has left the program virtually useless in areas where home prices typically are much higher. However, the problem with FHA loan limits is affecting more than just the highest-cost areas, he noted. Families in less-expensive markets are being shut of homeownership due to low FHA loan limits that have not kept up with home price increases in those markets, Casper explained.
 NAR has determined that the current limits in individual markets are keeping approximately 4.7 million potential buyers across the nation from becoming homeowners. "Raising the limit will open up homeownership to many more families nationwide by extending FHA to a broader range of market areas," he said.
 Casper also focused on the National Homeownership Trust program, which was included in NAHA but appropriated no funds. Under the program, qualified home buyers would receive a federal subsidy to lower the effective interest rate for their mortgage loans to 6 percent. NAR supports reauthorizing and funding the program. However, Casper said NAR remains concerned over a provision in the program that requires repayment of the subsidy upon sale of the property. The amount of accumulated debt may far exceed the amount of equity and appreciation a homeowner has in the property, he noted. Casper suggested that the subsidy be limited, by either capping it at a maximum percentage or dollar amount, or by restricting it to a certain number of years following the home purchase.
 Other issues in Casper's testimony included:
 -- Multifamily finance -- The prolonged credit crunch has severely curbed the availability of new financing and the renewal of existing loans, making it difficult to maintain the current stock of multifamily rental housing. Additionally, federally backed multifamily programs are falling short of meeting the need for financing or construction. As a result, the supply of affordable rental units is shrinking notably. NAR is urging the federal government to enact practical, workable incentives for unit production.
 -- HOME -- NAR supports the concept of a housing block grant to provide states and communities with funds that can be used for a variety of housing activities. The association is concerned, however, that the HOME program places unnecessary limits on the total amount of funds that states or communities can use for various types of housing assistance. NAR recommends that grant recipients be permitted to use as much HOME funding as necessary for construction of affordable housing.
 -- Prepayment/preservation of low-income housing -- NAHA created an equitable method for addressing the issue of preserving low- and moderate-income housing. However, in implementing this provision, HUD has not adequately addressed the needs of property owners or tenants. The reauthorization bill should contain provisions forcing HUD to carry out congressional intent on this issue.
 -- Section 8 project-based assistance -- NAR supports programs that provide a project-based subsidy because they encourage the production of multifamily housing. Housing markets in many areas are so tight that project-based subsidies are necessary to support the development of affordable rental housing. The direct commitment of federal resources through project-based subsidies is an efficient way to spur new construction and rehabilitation.
 The National Association of Realtors, "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- 4/7/92
 /CONTACT: Trisha Morris, 202-383-7560, or Liz Duncan, 202-383-1043, both of the National Association of Realtors/ CO: National Association of Realtors ST: District of Columbia IN: SU: LEG


MH -- DC026 -- 5895 04/07/92 14:23 EDT
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