Statement from Secretary Alphonso Jackson

Information by State  Print version

I want to offer my full support for "The Expanding American Homeownership Act" which was introduced in the U. S. House of Representatives today by Congresswoman Judy Biggert and Congressman Spencer Bachus. I appreciate their leadership as well as the ongoing efforts of Chairman Barney Frank and Chairwoman Maxine Waters to modernize the Federal Housing Administration (FHA). I urge prompt House consideration of this priority legislation.

At a time when so many families are being steered toward risky exotic mortgages, it is incumbent upon the federal government to provide a user-friendly FHA alternative. This far-reaching proposal to modernize the FHA will make it a more important financing option in today's housing market. American families need to know there is a safe, fair, and more affordable alternative.

As our economy grows, FHA modernization will give millions more low- and moderate-income families safe access to the credit they need to achieve the American dream of homeownership. The Expanding American Homeownership Act is identical to legislation passed by a 415 - 7 vote in the House of Representatives last year (H.R. 5121).

FHA was created in 1934 to give homebuyers access to reasonably priced mortgages under fair terms. Over the years, it has been able to help more than 34 million families become homeowners and now it needs to be able to adapt to today's marketplace. This important legislation would bring FHA into the 21st Century and offer hard-working Americans a variety of safe homeownership options at a fair price.

The Expanding American Homeownership Act would:

1. Eliminate the current statutory three percent minimum down payment, reducing a significant barrier to homeownership. FHA's existing down payment requirement does not meet the demands of today's marketplace, where most first-time homebuyers put down two percent or less. The "new" FHA would offer a variety of down payment options.



2. Create a new, risk-based insurance premium structure for FHA that would match the premium amount with the credit profile of the borrower. It would replace the current structure, in which there is standard premium amount for all borrowers, while still protecting the soundness of its Insurance Fund. FHA would have the flexibility to charge a lower premium for low-risk borrowers, and to charge higher-risk borrowers a slightly higher premium.



3. Increase and simplify FHA's loan limits. FHA's loan limit in high-cost areas would rise from 87 to 100 percent of the GSE conforming loan limit and in lower-cost areas from 48 to 65 percent of the conforming loan limit. This change is crucial in today's housing market. In many areas of the country, the existing FHA limits are lower than the cost of new construction, eliminating FHA financing as an option for buyers of new homes in those markets. FHA has simply been priced out of the market in other areas, such as California, where FHA insured only about 5,000 home mortgages in all of 2005, down 95 percent from 109,000 in 2000.

###