FHA Empowerment

The Federal Housing Administration (FHA) was created as a separate entity by the National Housing Act on June 27, 1934, to encourage improvement in housing standards and conditions, to provide an adequate home financing system by insurance of housing mortgages and credit, and to exert a stabilizing influence on the mortgage market. FHA offers single-family and multifamily mortgage insurance programs that work through private lenders to extend financing for homes and rental properties. FHA has historically been an innovator, with the introduction of the now industry-standard 30-year mortgage and with its reverse mortgage lending product, the Home Equity Conversion Mortgage. Over the past several decades, FHA's mission increasingly has focused on expanding homeownership and affordable rental opportunities for those families, areas and projects that would otherwise not obtain financing or not obtain financing with affordable terms. In addition, FHA has a long track record of successful financial management - generating revenue for the U.S. Treasury each year of its existence.

FHA faces severe challenges in its efforts to manage its resources and programs. These challenges threaten FHA's ability to serve its public purposes. Unaddressed, these issues will cause FHA to become less relevant and will leave those families served by its programs with no alternative for homeownership or affordable rental housing. At the same time, the mortgage market has undergone significant changes over the past decade with the United States now having the world's most sophisticated real estate finance system. FHA needs to be able to keep pace with these rapidly evolving market changes by more effectively managing its resources and programs.

MBA's concern about FHA is derived from three facts. First, despite the fact that FHA remains an industry leader in serving minority, first-time and low-income homebuyers, loan production has dropped dramatically, a result of low loan limits, product inflexibility and increasing difficulty lenders experience when working with FHA. Secondly, reports issued over the past several years indicate that FHA does not appear to have sufficient management of its human resources nor adequate technology to appropriately manage its mortgage insurance programs and its $350+ billion mortgage insurance portfolio. Lastly, FHA's multifamily programs remain viable but FHA has become largely a niche player in specialty markets. Also, with the continued reductions in staffing and loss of experienced staff, the future viability of the multifamily programs is in doubt.

Over the past two years, FHA has made several significant regulatory improvements to its single-family programs, including instituting electronic endorsement, modernizing its appraisal requirements to better match the conventional market, updating out-dated restrictions on closing costs and creating a streamlined moderate rehabilitation loan program.

MBA is working with Members of Congress to achieve final passage of FHA reform provisions.

Issues Update
1/9/2009 MBA Testimony, FHA Oversight
4/23/2008 MBA Policy Correspondence: H.R. 5830
4/10/2008 MBA Testimony: FHA's Role in Addressing the Housing Crisis

FHA Mortgagee Letter 2008-06: Temporary Loan Limit Increase for FHA

2/21/2008 MBA Policy Correspondence: Letter to Director Lockhart and Commissioneer Montgomery on Temporary Increases in FHA and GSE Loan Limits
2/15/2008 MBA Policy Paper: Stimulus Package Increases in FHA and GSE Loan Limits
1/30/2008 MBA Policy Correspondence: Surety Bond Requirement Regarding HR 1852
7/18/2007 MBA Testimony: Modernization of Federal Housing Administration Programs
4/19/2007 MBA Testimony: Expanding American Homeownership Act of 2007: H.R. 1852 and Related FHA Modernization Issues
3/15/2007 MBA Testimony: Solvency and Reform Proposals for the Federal Housing Authority