HUD Archives: News Releases

HUD No. 06-069 For Release
June 19, 2006


I want to offer my full support for "The Expanding American Homeownership Act" which was introduced in the United States Senate today by Senator Jim Talent of Missouri. I appreciate Senator Talent's leadership and urge prompt Senate consideration of this priority legislation.

This far-reaching proposal to modernize the Federal Housing Administration (FHA) will make it a more important financing option in today's housing market. It will enable FHA to reach more prospective borrowers and allow millions more low- and moderate-income families to achieve the American dream of homeownership.

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 21 st 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.

H.R. 5121, the House version of the Expanding American Homeownership Act, was introduced on April 6, 2006, by Representatives Bob Ney, Maxine Waters, Gary Miller, and Patrick Tiberi. It enjoys the bipartisan support of 67 cosponsors and was unanimously approved by the House Financial Services Committee on May 24, 2006.


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