CUOMO SAYS HUD IS HELPING THOUSANDS MORE MONTANA FAMILIES BECOME HOMEOWNERS

GREAT FALLS, MT - U.S. Housing and Urban Development Secretary Andrew Cuomo today said HUD is increasing the availability of home mortgage loans and providing $35,600 for housing counseling in Montana to help thousands more families in the state become homeowners.

"We're working closely with lenders, the housing industry, and non-profit groups to boost homeownership in Montana," Cuomo said. "Our actions will create new jobs for construction workers and others in the housing industry, will strengthen Montana's economy, and will improve the lives of families by offering them new housing opportunities."

Cuomo, who was visiting Montana, said that as a result of HUD actions:

• The number of home mortgages in the state insured by the Federal Housing Administration - which is part of HUD - is expected to rise 54 percent in fiscal 1999, jumping from 3,187 last year to over 4,900 in the current fiscal year. In dollar terms, the value of mortgages insured by FHA in Montana is expected to rise 60 percent, going from $230 million last year to $367 million in the 1999 fiscal year, which runs through September.

• The nation's two largest housing finance companies are expected to buy an estimated $5.5 billion in mortgages in Montana to finance affordable housing for an estimated 63,000 low-and moderate-income families in the state over the next 10 years, under a nationwide policy initiative. The dollar volume of the loans in Montana is about $1.1 billion higher under the new initiative over the next 10 years that it would have been otherwise. The number of Montana families benefiting over the 10-year period is about 16,000 greater than would have benefited without the new initiative. The loans will be purchased by finance companies Fannie Mae and Freddie Mac, under a policy that affects states around the country. The companies are regulated by HUD.

• Local housing counseling agencies in Montana are being awarded $35,600 in HUD housing counseling grants to assist them in providing services to Montana homeowners, homebuyers, and prospective renters and tenants. The housing counseling grants announced today will help families utilize the increased mortgage funds available under the other HUD initiatives.

A total of 68.6 percent of Montana families owned their homes last year -- slightly above the national homeownership rate of 66.3 percent in 1998.

Here are more details on the three initiatives:

MORE FHA-INSURED LOANS IN MONTANA

FHA loan limits increased at the beginning of this year nationwide. In Montana on a statewide average, the limit on mortgages that could be insured by FHA rose from $86,317 last October to $115,200 this year. The increase, along with other HUD policies designed to boost homeownership, resulted in the sharp boost in FHA loans to Montana families this year, and will fuel continued increases in the years ahead.

Before the increases took effect, the FHA loan limits fell below the cost of most homes in many communities. As a result, many families who needed FHA mortgage insurance to qualify for a home purchase were effectively locked out of homeownership. Cuomo said the higher loan limits will particularly benefit first-time homebuyers, because 80 percent of FHA-insured home loans go to first-time homebuyers.

FHA does not make mortgage loans directly, but rather insures loans made by private lenders to homebuyers. FHA insurance guarantees the lender timely payment of principal and interest, in the event the homebuyer defaults on the loan. Because FHA mortgage insurance protects lenders from losses, it has enabled millions of Americans who would otherwise be locked out of the mortgage market and homeownership to qualify for mortgages.

MORE LOANS BY FANNIE MAE AND FREDDIE MAC IN MONTANA

HUD is raising the required percentage of mortgage loans for low- and moderate-income families that finance companies Fannie Mae and Freddie Mac must buy nationwide from the current 42 percent of their total purchases to a new high of 50 percent - a 19 percent increase - in the year 2001. The percentage will first increase to 48 percent in 2000.

The mortgage purchase requirement for Fannie Mae and Freddie Mac - known as the Affordable Housing Goals - was last set by HUD in 1995, under a requirement mandated by Congress. The goals came up for renewal this year, and HUD had the choice of leaving them unchanged, lowering them, or raising them. Fannie Mae and Freddie Mac buy mortgages for both individual homes and for apartment buildings.

Congress gave HUD the responsibility of regulating Fannie Mae and Freddie Mac because the two companies are Government Sponsored Enterprises (GSEs) chartered by Congress. The GSEs buy mortgages issued by banks, thrift institutions and other lenders, and then package the loans and sell them to investors as securities. When Fannie Mae and Freddie Mac buy the mortgages from lenders, they provide the lenders with the cash needed to issue new mortgages.

NEW GRANTS FOR MONTANA

The housing counseling grants Cuomo announced today will go to three agencies in Montana: District 7 Human Resources Development Council in Billings, which will receive $15,556; Northwest Montana Human Resources, Inc. in Kalispell which will receive $5,132; and Women's Opportunity and Resource Development in Missoula, which will receive $15,000.

Organizations getting grants will use them to counsel first-time homebuyers, homeowners and renters facing financial difficulties and other housing-related problems. In addition, the organizations can use the funds to assist people, including minorities and people with disabilities in becoming more aware of homebuying opportunities.

Content Archived: January 20, 2009