President Proposes FHA Reform Boost

A Federal Housing Administration reform package proposed by the Bush administration could increase FHA single-family originations by 100,000 loans a year, according to FHA commissioner Brian Montgomery.The Department of Housing and Urban Development estimates that the reforms, currently pending in Congress, would increase FHA purchase mortgage originations by 100,000 the first year and by nearly 500,000 a year by 2012. FHA endorsed 478,400 loans in fiscal year 2005, down 46% from FY 2004. During the first half of FY 2006, FHA endorsements totaled 189,700 as of March 31, down 24% from the same six-month period in FY 2005. "The number of working families served by FHA has declined considerably" and HUD is "very concerned," the commissioner told a National Association of Realtors meeting. Mr. Montgomery's main message is the FHA reforms will expand homeownership opportunities and provide working families with less costly and safer alternatives to subprime loans. The reform legislation, as introduced in the House, would also raise FHA loan limits so FHA could be a viable product in California again and other high cost states.