FY 1999 Annual Performance PlanStrategic Objective 6
Increase Homeownership Opportunities, Especially in Central Cities, Through a Variety of Tools, Such as Expanding Access to Mortgage Credit
One of HUD's most important functions is to increase homeownership
opportunities for all Americans. Through homeownership, a family
acquires a place to live and raise children. A home is also an
asset that can grow in value and provide the capital needed to
finance future needs of the family, such as college or financial
security for retirement.
HUD homeownership efforts include:
FHA: Lowering Homeownership Costs for City Homebuyers
HUD has reduced the mortgage insurance premium through the FHA
insurance program. The first-time homebuyer, by obtaining homebuyer
counseling, reduces the up-front premium by 12.5 percent (from
2 percent to 1.75 percent of the mortgage amount). HUD expects
45,000 homebuyers a year to benefit from the reduction, which
makes homeownership more affordable.
To stimulate further activity and reduce disparities between
suburban and central city homeownership rates, the President also
has announced an additional reduction of 25 basis points targeted
at middle class and lower income first time homebuyers in central
cities who receive homebuyer counseling.
The FHA programs are organized into four major activities:
FHA serves that portion of the population locked out of the conventional
market. FHA has become a more results-oriented, financially accountable
credit-enhancement operation over the last four years and will
continue to serve the homeownership needs of people and places
that the private sector leaves behind.
This program targets homeownership expansion in inner cities.
These grants leverage substantial public and private investment,
used by cities to reclaim abandoned and distressed neighborhoods
through the creation of large-scale homeownership developments.
Program funds support infrastructure costs, site preparation,
land acquisition or deferred-payment mortgages to working families.
Ginnie Mae: Targeted Lending Initiatives
Ginnie Mae is using its Mortgage-Backed Security Program to provide incentives to lenders to do more business in targeted central city areas. Through the Targeted Lending Initiative (TLI), Ginnie Mae reduced the guarantee fees it charges lenders by up to 50 percent for making mortgage loans in any of the Nation's 72 Empowerment Zones or Enterprise Communities and adjacent eligible Central City Areas. The incentive to lenders is expected to increase central city lending by $5 billion by the Year 2000. The initiative's first year (FY 1997) has a goal of $1 billion increase. That goal will be exceeded, resulting in increased homeownership for almost 15,000 families.
Government-Sponsored Enterprises (GSEs)
The Federal Housing Enterprises Financial Safety and Soundness
Act gives HUD the responsibility to monitor GSE compliance with
the fair lending provisions of that act and the Fair Housing Act.
HUD also has the responsibility to establish goals for GSE purchases
of mortgages in urban, rural and under-served areas to expand
homeownership opportunities for low- and very low-income families.
Homeownership Empowerment Vouchers
Approximately 1.4 million households receive Section 8 certificates
and vouchers to help them rent apartments in the private market.
Under the Section 8 program, the Federal Government makes up
the difference between a family's rental housing costs and the
amount a family can afford. However, there are many low-income
families who are able to accept the responsibilities of homeownership
but cannot do so because they are caught in a spiral of renting.
The current Section 8 rental housing program cannot assist these
The administration now proposes to allow these families to use
Section 8 assistance as Empowerment Vouchers to become first-time
homebuyers. This is consistent with the administration's goal
to promote family self-sufficiency, encourage the formation of
household wealth, and foster healthy communities.
PIH: Public Housing Homeownership and Indian Loan Guarantee
As part of its application for Hope VI assistance, a PHA may
propose to include homeownership opportunities for its residents.
Eligibility requirements for such units must be essentially the
same as the program requirements of other HUD homeownership programs
such as Nehemiah and Section 5(h) of the 1937 Act. A PHA that
proposes homeownership activities submits a Homeownership Plan
to HUD that describes all aspects of the proposed homeownership
The Indian Loan Guarantee program, administered by the Office
of Public and Indian Housing, provides loan guarantees for Native
American Families and tribally designated housing entities (formerly
Indian housing authorities) to purchase, construct and/or rehabilitate
single family homes on restricted land and in designated Indian
areas. It provides opportunities to expand homeownership through
the private financing of home mortgages which would otherwise
not have been possible because of the unique status of Indian
land. Private financing for the purchase of homes in Indian country
was almost non-existent prior to the implementation of this program
HUD must not only encourage homeownership, but must also address
the issue of homeownership retention. Increasing the rate of
first-time homebuyers is useless unless those homebuyers continue
to succeed in homeownership.
FHA insurance programs are designed to offer opportunities to
potential homebuyers who might otherwise not be able to
realize their dreams of homeownership. For people who have obtained
an FHAinsured mortgage and who encounter financial difficulties
which result in a mortgage delinquency, FHA has structured a Loss
Mitigation Program which will maximize the opportunity for borrowers
to retain homeownership and cure the delinquency on their mortgage.
Existing relief measures such as special forbearance, mortgage
modifications, pre foreclosure sale and deedinlieu
are being been expanded to enable a greater number of homeowners
to be eligible for the programs. A new tool, partial claims,
supports homebuyers who can only partially recover from a financial
With the help of these new tools FHA expects that, by the year
2002, the Department will help 20% of all homeowners (or approximately
12,000 families a year) who in the past would have lost their
home to foreclosure remain in their home and "cure"
Linkage to HUD 2020: Management Reform Plan
Single Family Housing currently performs loan production, asset
management and property disposition with 2,080 employees in 81
locations across the country, in addition to 190 Headquarters
staff. The creation of just two Homeownership Centers (HOCs),
instead of 81, will generate economies of scale and encourage
better use of technology. To "jump start" the transition,
HUD will either streamline or outsource Real Estate Owned activities
and sell nearly all assigned notes.
This consolidation and streamlining will provide faster, more uniform service to clients, lenders and borrowers. Loan production will increase in targeted populations with better marketing and outreach. Processing time for insurance endorsements will be cut from two weeks to one day. Providing higher quality, more efficient service to the customer will allow HUD to achieve its homeownership objective.
Housing is greatly dependent on conditions in the financial markets
for the success of many of its programs. For example, if interest
rates are high, many potential homeowners cannot afford the cost
of first-time homeownership, resulting in much reduced production
volume for FHA. Similarly, if the economy is weak with high unemployment,
FHA loans may be adversely impacted by defaults since many financially
strapped homeowners may not be able to make their mortgage payments.
In other areas, such as the National Homeownership Strategy,
FHA is a key player in the partnership of various organizations
attempting to raise the national homeownership rate, but Housing
is not the dominant player and is unable to raise
the rate to the target without the concerted effort of all the
Annual Performance Goals
Increasing the national homeownership rate to 67.5% by the Year 2000 remains a goal of the Clinton Administration. Within the limitations set forth under External Factors, above, HUD will do everything it can to reach this goal. We will increase the amount of single family FHA mortgage insurance in underserved areas each year and increase the share of first time homebuyers through Housing, FHA and Ginnie Mae programs. Through PIH programs, we will increase the number of public housing residents and Native Americans purchasing homes. HUD will continue to provide services targeted to the reduction of the default rate.
|Content Archived: November 29, 2011|