Aaron Kalinowski

But in an agency so large, it's easy to lose sight of the forest for all the trees of rules and regulations, programs and policies. Sometimes it's enough to leave you dizzy, wondering where HUD's headed.

But then you get a call or a letter. The kind of letter Engram Loyd, director of HUD's Philadelphia Homeownership Center, recently received from Tony and Carol Kalinowski who thanks to a good bank - Wells Fargo - and a good program - HUD's 203k acquisition and rehabilitation a mortgage - made a dream come true.

"Our son was born premature," the letter read. "We didn't realize how our lives would change.

"After months of hospital visits and time off from work, we were struggling to make ends meet. We had to file for bankruptcy and move into a rented property. We thought we'd never own a home, always be living in low rent properties in t not so great neighborhoods.

"Things seemed very bleak. We were struggling with two special needs children and barely making ends meet. Things in that neighborhood had gotten out of control and my son couldn't go out to play without fear of being picked on and beat up.

"We finally found a place we could afford in a nice neighborhood. The neighbors were wonderful and actually cared about us and our children.

"A year later, the owners decided to sell. We were devastated. How could we afford another move? Where would we ever find neighbors like this again? Would we never have a real home?

"Then the other half of the house went on the market. What if we could talk the owners of both places into selling on a rent to own plan? We'd open it up so that it was handicap friendly and adaptable if our son ever became wheelchair bound. We could make a real home!

"But the owners weren't interested in rent to own. Everything came crashing down again.

"I told my husband I'd start calling banks and see if there was some loan we could qualify for. No bank would even consider us for a loan. We'd all but given up hope.

"Then one day I was on the Internet searching for other resources. For some reason, one stood out - Wells-Fargo. My husband said go ahead and call, but you know they're going to laugh at us.

"I didn't want to get my hopes up. Then I called, my heart racing and feeling tongue tied. I was put through to Bette Donahue.

"I don't remember much about our first conversation, except that when I hung up I actually felt hopeful, like I had found someone human, not just another robot denying applications.

"Bette didn't just guide us through each issue that arose, but supported us, understanding what we were going through and wanting to make our dream a reality as much as we did.

"Then, finally, she called to say "you're approved." She was as happy as we were! We had just made the first step into the rest of our lives - - a good life, with a beautiful home where we'd be able to care for our sons and provide the home they need. We were proud, and a little afraid, but the overwhelming feeling was "we're home!"

This is one of "happily ever after stories," Engram Lloyd commented to a group of HUD employees in Philadelphia, a story especially welcome when the national housing market is in turmoil and growing numbers of homeowners face the loss of their homes.

Indeed, Lloyd thinks the Kalinowski's story points to "the bigger role that FHA has to play in today's market." Since its establishment in 1934, FHA insured mortgages have been particularly attractive to first-time buyers, especially because of the low down-payment requires and flexible underwriting.

Over the past decade, though, new conventional mortgage products and, especially, subprime lenders have taken a much greater share of the first-time market, exposing many first time buyers to risky, even treacherous loans. The result? Record foreclosures, rising inventories of vacant houses and more at-risk neighborhoods.

The Kalinowski's story, Lloyd said, suggests that "an FHA loan may still be the best, the safest and most affordable mortgage option. And, best of all, an FHA borrower who hits a bump in the financial road can take advantage of a host of FHA foreclosure programs they won't find any other place. A lot of buyers who went subprime a couple of years ago," he added, "probably wish they'd gone FHA."

"Think of FHA," he concluded, "an old friend, a friend you haven't seen in a long time. Just when you need him, the old friend shows up. As the Kalinowskis attest, FHA is the best old friend a new homebuyer can have."

In addition to receiving down payment assistance, the Kalinowski's used an FHA 203(k) mortgage from Wells Fargo to combine the two units into one house. A 203(k) mortgage allows homebuyers to finance the cost of both acquisition and rehabilitation in one instrument. Working with an approved 203(k) consultant, funds are placed in an escrow account and disbursed as rehab work is completed. Its flexibility, Lloyd said, allows buyers to "turn the house they can afford into the kind of house they want." Over the last five years, HUD and its lending partners have made over 21,817 203(k) loans nationally.

• Learn more about the 203(k) loan program
• Find an FHA Lender near you

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