In its proposed fiscal year 2004 budget, the U.S. Department of Housing and Urban Affairs (HUD) announced a new mortgage product to offer Federal Housing Administration (FHA) insurance for subprime loans.
HUD secretary Mel Martinez unveiled plans for the product, the Mutual Mortgage Insurance Fund mortgage loan program, on Tuesday at the U.S. Senate Committee on Banking, Housing, and Urban Affairs. He said it's expected to generate an additional $7.5 billion in endorsements for 62,000 additional homes.
In addition to the new product, Martinez outlined the expansions of various existing programs intended to educate borrowers about predatory lending and increase minority homeownership, with a special emphasis on decreasing chronic homelessness.
One of the proposed expansions is for the American Dream Downpayment Initiative, from $75 million this year to $200 million for 2004. The program was first introduced in 2002, and the expanded amount for next year is expected to help about 40,000 low-income families with down payment and closing costs on a home purchase.
Martinez added that FHA insured $150 billion in mortgages in 2002 for almost 1.3 million borrowers, most of them first-time buyers. That's a 21% increase over the previous year, and 36% of those borrowers were of minority households, he said.
The largest FHA product is single-family mortgage insurance, but it also insures home rehabilitation loans, condominium loans, energy efficiency loans, and reverse mortgages for senior borrowers. It offers special discounts to teachers and police officers who purchase homes that have been defaulted to HUD, but they must commit to living in the revitalized areas where the homes are located.