I’ve been saying in my blogs for months and months how FHA (Federal Housing Administration) and FHFA (Federal Housing Finance Agency) are out of touch with the housing market and that they both need to concentrate on getting the first time homebuyers back into the market. Well, it looks like they finally are starting to listen to me!
First, FHA has come up with HAWK (Homeowners Armed with Knowledge). Basically, this will be a pilot program that if the borrower completes a housing counselling class they will be able to reduce the monthly mortgage insurance 50 basis points. Currently, FHA’s monthly mortgage insurance rate is 1.35% a month (ridiculously high, it was .50% in 2009). So, the borrower will have an opportunity to get the mortgage insurance down to .85% a month (it’s a start but .85% should be the maximum, not the minimum). There are a few other advantages to the HAWK program but the reduced monthly mortgage insurance is the big draw. It looks like this will be rolled out in the fall (why not right now?) The program also states that the class needs to be taken BEFORE the real estate contract is signed. I’m hoping FHA will amend this to say that the class can be taken AFTER the contract is signed but has to be completed before closing.
The second indicator that the mortgage guidelines might be loosening a bit is that on Tuesday FHFA director Mel Watt stated that maintaining credit availability is one of his main goals. He stated that Fannie Mae and Freddie Mac should direct their focus toward making more credit available to homeowners. My prediction is that within the next 6 months Fannie and Freddie will come out with lower down payment loans to get the first time homebuyers back in the market. Looks like FHA and FHFA see the signs and are moving in the right direction. Baby steps!