May 13, 2014

A Blueprint for Access to Credit for American Families

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Couple signing mortgage documents

Many families look forward to the day they can establish deep roots in a community by buying their own home and taking advantage of all the opportunities that brings.  But, for too many American families the thought of owning a home is dream that never becomes a reality.

Today, it’s tough for anyone with less than perfect credit to get a mortgage.  In many cases borrowers who are qualified still struggle to get a mortgage to purchase a home.  The President has said that responsible access to credit is critical for growing and strengthening the middle class.    That’s why FHA is proposing steps to ensure that qualified borrowers, especially first-time homebuyers, have an opportunity to purchase a home – the exact reason FHA was created almost 80 years ago.

To make this happen, we’re:

  • Encouraging Housing Counseling – Responsible access can be enhanced by making sure borrowers are well educated about the home buying and mortgage finance process.
  • Establishing Clear Rules of the Road – Lenders must be able to quantify the risk of making a mortgage loan. We’re taking steps to establish clear quality assurance policies so that lenders can provide access to mortgage credit without fear of unanticipated consequences.
  • Avoiding Unsound Lending Practices – Facilitating access does not mean returning to the days of unsound lending practices. It means building on the reforms already in place that support safe, responsible lending.

Our Homeowners Armed with Knowledge (HAWK) pilot program is built on the knowledge that housing counseling works.  Research shows a strong correlation between housing counseling and mortgage performance. Delinquency rates for borrowers who have received counseling are 29% lower for first time homebuyers and 15% lower overall.  Consumers who participate in housing counseling get individualized, objective advice on understanding the rights and responsibilities of homeownership, addressing credit and savings barriers and meeting their overall housing and financial goals.  Through the HAWK pilot, FHA is taking active steps to help make responsible homeownership available and sustainable for American families.

As proposed, HAWK for New Homebuyers will help increase access to credit for first-time homebuyers. . Under the four-year pilot program, homebuyers who commit to housing counseling will qualify for tangible savings on their FHA-insured loans.  The average buyer would save approximately $325 a year – or almost $9,800 over the life of their loan.  The HAWK program is a strong step toward integrating housing counseling into the home buying process and ensuring broad access to housing counseling services. By making FHA loans more affordable to first-time homebuyers we’re building a better foundation for middle-class homeownership.

Along with encouraging potential homebuyers to become more knowledgeable about the complicated process of buying and owning a home, we also want to work with mortgage lenders to communicate FHA’s quality assurance policies in a way that ensures that loans are originated according to our guidelines. Clarity and transparency in the communication of FHA’s policies will, according to feedback from lenders, provide the confidence our partners need to lend across the entire credit spectrum – especially to under-served borrowers. More concise, consistent and clear policy direction and enhanced lender monitoring better protects FHA, borrowers, lenders and taxpayers.

Today’s release of FHA’s Access Blueprint outlines the specific steps we will take over the next few months.  Not only are we preparing FHA to better serve the American people, we’re making sure that the American Dream of homeownership can continue to become a reality for the next generation.

Carol Galante is the Assistant Secretary for Housing and Commissioner of the Federal Housing Administration (FHA).

One Response to A Blueprint for Access to Credit for American Families

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