HUD Archives: News Releases

HUD No. 06-095
Lemar Wooley
(202) 708-0685
For Release
August 14, 2006

FHA Modernization Proposal & Reauthorization of Mark-to-Market Program

WASHINGTON - The National Association of Counties (NACo) passed two resolutions of support for HUD initiatives at their annual conference in Chicago last week. NACo is now on record supporting both 'The Expanding American Homeownership Act,' modernizing the Department's Federal Housing Administration (FHA), and the reauthorization of the Mark-to-Market Affordable Housing program.

"I applaud the NACo's support of both these initiatives," said Housing and Urban Development Secretary Alphonso Jackson. "The Expanding American Homeownership Act will increase homeownership opportunities for millions of Americans by modernizing the FHA and returning it to its traditional role as an important financing option in today's housing market. And, continuing the Mark-to-Market program will help ensure that affordable rental housing remains a viable option for families who need it."

Secretary Jackson expressed his appreciation for the leadership provided by County Commissioner Grady Prestage of Fort Bend County, Texas, who sponsored the NACo resolutions. The NACo joins the U.S. Conference of Mayors, which has also endorsed these initiatives.

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

The U.S. House of Representatives passed The Expanding American Homeownership Act on July 25 by an overwhelming vote of 415 to 7. The measure is now being considered in the Senate.

The Expanding American Homeownership Act (H.R. 5121) (S. 3535) will enable FHA to reach more prospective borrowers and allow millions more low- and moderate-income families to achieve the American dream of homeownership. Many of these borrowers currently have little choice but to pay subprime rates because FHA lacks the ability to offer an affordable financing option.

The Expanding American Homeownership Act will:

  • 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.

  • 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 a 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.

  • 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.

Mark-to-Market Affordable Housing Program:

The Mark-to-Market program is one of the principal ways in which HUD preserves affordable housing. Over the past nine years, the Department has been very successful at balancing the dual Mark-to-Market program goals of reducing long-term Section 8 subsidy costs while preserving affordable housing.

In 1997 Congress began to require HUD to review expiring multifamily Section 8 contracts, and where the subsidized contract rents were above comparable market rents, to reduce the rents to market levels upon contract renewal. It also authorized HUD to restructure the underlying mortgages of these projects. By funding and completing physical rehabilitation while restructuring the properties, HUD positions the projects to be physically and financially sound as affordable housing resources. Over 120,000 units in 1,500 multifamily projects have been restructured in this way. The program is scheduled to sunset on September 30, 2006.

A bill (S. 3511) to extend and expand the Mark-to-Market program through FY 2011 has been introduced in the Senate. A similar bill (H.R. 5527) has been approved by the House Financial Services Committee and is awaiting floor action.

HUD is the nation's housing agency committed to increasing homeownership, particularly among minorities; creating affordable housing opportunities for low-income Americans; and, supporting the homeless, elderly, people with disabilities and people living with AIDS. The Department also promotes economic and community development, and enforces the nation's fair housing laws. More information about HUD and its programs is available on the Internet and


Content Archived: May 06, 2010