The Federal Housing Administration needs more resources manage its way through the current housing market crisis and thrive when the market recovers according to a report from the Mortgage Bankers Association.
Developed by the MBA’s Council on the Future of FHA and Ginnie Mae, the report provides 12 recommendations to improve the government agencies.
“FHA and Ginnie Mae are cornerstones of the U.S. housing market as they provide access to mortgage loans for millions of first-time, and low- and moderate-income homebuyers. MBA members support both of these institutions,” said MBA Chairman Robert E. Story Jr., CMB. “MBA has long advocated for changes that will help guarantee a strong FHA and Ginnie Mae.”
The MBA’s council recommends that FHA strengthen and embrace the HECM) program as a viable and helpful product for seniors citizens. As the only government program that helps senior citizens age in place while providing them access to equity in their home, the continued erosion of housing prices has jeopardized the program’s future by impacting its actuarial foundation.
According to the report, the post 2007 housing market and its on-going negative or flat price assumptions make the need for an appropriation or further program modifications likely. While the council realizes the FHA is required to determine its actuarial soundness through estimates and forecasts of the future economic value of the portfolio, it questions whether it’s the best approach.
“Given the enormous level of social importance of this determination, perhaps FHA should assess whether or not this is the best way to determine its perceived economic health,” said the report. “This method is potentially problematic if the ripple effect of more pessimistic forecasts leads to even more programmatic constraints that make the HECM product so expensive and complex that seniors question its viability and affordability.”
After the 10 percent principal limit reduction in FY 2009, which eliminated most of the proposed $798 million subsidy, the number of seniors who have access to the program has fallen.
“On the surface, this seemed like a prudent and fiscally responsible move, however, the reduction in proceeds has contributed to the near flat, if not negative, growth in the program following years of steady volume increases,” said the report.
