Mortgage Daily Logo
mortgage news from industry experts

FHA Commissioner Addresses Brokers

FHA Commissioner Addresses BrokersNAMB conference held in Washington, D.C.

April 4, 2006

By LISA D. BURDEN
Washington, D.C., correspondent for MortgageDaily.com

WASHINGTON — The Federal Housing Administration’s commissioner told a standing-room-only audience of mortgage brokers last week that the housing agency wants to “dig deeper into the borrower pool.”The National Housing Act must be amended to allow the government agency the flexibility to offer better products, FHA Commissioner Brian Montgomery said in a speech to the National Association of Mortgage Brokers.

The group was holding its Legislative and Regulatory Conference in Washington, D.C.

Montgomery said the agency is proposing legislation that will address the biggest barriers posed by FHA financing by asking for an increase in FHA loan limits, eliminating the minimum cash investment, modifying the agency’s “complicated” downpayment formula and making changes to its premium structure that will allow FHA to “dig deeper into the borrower pool.”

Montgomery said the agency has already implemented a new policy on refinancing, allowing cash out refinances up to 95 percent loan-to-value, an increase from the previous 85 percent loan-to-value limit.

He told the full audience that FHA implemented in January significant changes to its appraisal requirements by “moving away from our previous onerous repair and inspection requirements” to adopting industry standards. Repairs and inspections are now called for only when defects are structural or affect the health and safety of the occupant.

“We no longer require repairs for cosmetic items such as a missing handrail or cracked windowpane,” he said. Termite and flat roof inspections are now required only in areas where they are customary.

In the past, all FHA borrowers, regardless of location, were required to obtain termite and flat roof inspections for the house they were interested in purchasing through the agency.

Montgomery said FHA also recently launched a streamlined 203(k) program that can be used for simple remodeling or basic projects that won’t affect the property’s structure such as replacing shag carpeting, putting on a new roof or updating a kitchen. Up to $35,000 can be financed into the mortgage to provide for the repairs.

FHA’s operating procedures have been changed to make them more compatible with conventional loan processes, he said. The endorsement process has been retooled to make it less cumbersome for lenders to do business with FHA. For example, lender insurance allows lenders to self-endorse without pre-endorsement from FHA.

In a question-and-answer period that followed Montgomery’s speech, Margaret Burns, director of the Office of Single Family Program Development and James Beavers, deputy director of the Office of Single Family Program Development, answered the audience’s questions.

Currently, FHA requires mortgage brokers to submit annual financial audits to directly participate in the FHA program. NAMB has suggested that FHA replace the annual audit for mortgage broker participation in the FHA program with a surety bond payable to FHA. NAMB has said that nearly every state has implemented bonding rather than an audit for licensing and that the states have found bonding to be the preferred method of protecting citizens.

Burns said FHA has discussed eliminating and “there is some consideration” for eliminating FHA’s bond requirement for originating FHA loans. Thousands of brokers want to offer FHA loans but can’t because of the requirement, Joe Falk, the chairman of NAMB’s Government Affairs Committee commented.

Beavers said the “notorious” MCAW form — the Mortgage Credit Analysis Function — will disappear this year and be replaced with a form similar to what’s being used in the industry. He explained that FHA is waiting for the Office of Management and Budget to sign off on the move.

Montgomery said the changes — that he described as “long overdue” — are needed to stem the decline in FHA’s share of business and to recapture the type of borrowers who are now using more “exotic products” to finance their home purchases.


Lisa D. Burden is a legal analyst for MortgageDaily.com and holds a law degree from the University of Maryland. She is currently a freelance journalist who previously wrote for Institutional Investor publications and the Baltimore Daily Record.

e-mail Lisa at: burdenlisa@yahoo.com

Popular posts

How Long Does It Take to Refinance a Mortgage
How Long Does It Take to Refinance a Mortgage

So, you’re interested in refinancing your mortgage. Maybe you want some extra capital to do that home project you’ve always dreamed of, interest rates are nearing record lows, or you want to start consolidating debt. Regardless of the motivation behind the refinance,...

How Does Refinancing a Mortgage Work
How Does Refinancing a Mortgage Work

A home purchase is considered an investment, and a robust one at that. Savvy owners are constantly looking for new ways to reduce debt, save money, pay less in interest, and ultimately build equity. Refinancing is one way to leverage your investment and do just that....

What Does It Mean to Refinance Your Home
What Does It Mean to Refinance Your Home

You can think of refinancing your mortgage as a debt redo. Essentially, you’ll swap out the existing loan for a new one - ideally with better terms and conditions. Only this time it could help you save money on high mortgage payments, rather than just borrow it....

Setting up the Utilities in My New House
Setting up the Utilities in My New House

All the tedious, time-consuming home closing documents have been signed, sealed, and delivered. Your belongings are packed into what seems like a million boxes and you have a solid plan to haul all your existing furniture to the new place. Just as your boxes and...

When Is My First Mortgage Payment Due?
When Is My First Mortgage Payment Due?

Navigating your way through a brand new mortgage loan can be a difficult task, especially for first time homeowners. After handing over a large sum of money for the down payment and closing costs, it’s important to pay attention to the timing of your first mortgage...

Newsletter

Don’t worry, we don’t spam

calculate your monthly mortgage payment

Related Topics

Helpful Links

Daily mortgage rate trends

Best mortgage lenders

First-time homebuyers programs by state

Loan limits by state

Types of mortgages

APR vs interest rate

Understanding PMI

Related Posts

THE TRUSTED PROVIDER OF ACCURATE RATES AND FINANCIAL INFORMATION