HUD No. 07-046
April 19, 2007
HUD SECRETARY CALLS FOR RESTORING CONFIDENCE IN MORTGAGE LENDING PRACTICES THROUGH FHA MODERNIZATION
Jackson stresses mortgage alternatives and ending predatory lending
HOUSTON, TX - U.S. Housing and Urban Development Secretary Alphonso Jackson today said we must increase "transparency and honesty for lending on all levels and by all lenders" at the Credit Suisse Small and Emerging Manager Private Equity Conference. Speaking to over 300 business professionals, Secretary Jackson addressed the need to modernize the Federal Housing Administration (FHA) as an alternative to the predatory lending practices that are affecting our nation's housing market today.
"We must restore confidence in lending practices, top to bottom. We can begin by exposing and ending predatory lending. There is no place for it in the housing industry or as an investment practice. Predatory lenders and mortgage fraud harm everyone in the home purchasing process, making it all the more necessary that we offer a safe FHA alternative," said Jackson.
While subprime home loans allow individuals with limited or troubled credit to become homeowners, some of these loans, which can include interest rates up to 10 percent or more, are taking a toll on too many hard working American families, often forcing them into foreclosure, noted Jackson. Last year, more than one million families lost their homes due to foreclosure, an increase of 42% from the previous year.
Secretary Jackson encouraged Congress to assist him in his efforts to combat predatory lending by passing legislation to modernize the Federal Housing Administration (FHA) The program has helped more than 34 million families become homeowners over the past 72 years, and prevented 75,000 families from losing their homes to foreclosure in Fiscal Year 2006 alone, and another 36,500 since October of last year. However, as lending practices have evolved and modernized, the FHA has been unable to do so without legislation. Reforming the critical mortgage insurance program to adapt to today's marketplace could serve as a solution to predatory lending, providing families with the opportunity to obtain a fair, safe and affordable mortgage.
"With expanded authority to set insurance premiums commensurate with risk, FHA could potentially help thousands of borrowers who need an alternative to exotic loans. FHA modernization could save borrowers substantial money and do so in a financially sound manner," added Jackson.
Last year, the Bush Administration proposed a set of changes to the FHA program that would expand its reach by eliminating outdated downpayment requirements, customizing mortgage premiums for each homebuyer according to risk, and raising loan limits across the country. The bill, the Expanding American Homeownership Act of 2006, passed the House with overwhelming bipartisan support in July 2006-- by a vote of 415 to 7 -- and has been reintroduced this year. Jackson continues to urge the new Congress to make this a top priority to quickly pass this critical piece of legislation.
"Through the housing market, we can encourage investment programs that make the American Dream possible for millions of Americans. If we step forward, working together, we can transform a serious situation into an opportunity to vastly improve lending practices and create a more enviable investment environment," Jackson concluded.
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 espanol.hud.gov.