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The world of credit: Return on investment

National Mortgage Professional
Nov 19, 2006

Senate introduces legislation to modernize the national housing actMortgagePress.comlegislation, Senate, American Homeownership Act of 2006 U.S. Sen. Jim Talent (Mo.) introduced Senate Bill 3535 (S. 3535), the Expanding American Homeownership Act of 2006, to the U.S. Senate on June 19. The bill was co-sponsored by Sens. Mel Martinez (Fla.), Johnny Isakson (Ga.) and Saxby Chambliss (Ga.). S. 3535 would modernize the National Housing Act and enable the Federal Housing Administration (FHA) to more effectively provide affordable housing to low- and moderate-income borrowers. A similar bill (HR 5121) was recently passed in the U.S. House of Representatives. The bill strives to modernize current legislation in order to allow the FHA to adapt to recent changes in the mortgage loan industry. The purposes of the bill are: - To provide flexibility to the FHA to allow for the insurance of housing loans for low- and moderate-income homebuyers during all economic cycles in the mortgage market; - To modernize the FHA single-family mortgage insurance program by making such programs more reflective of enhancements to loan-level risk assessments and changes to the mortgage market; and - To adjust the loan limits for the single-family mortgage insurance program to reflect rising housing prices and the increased costs associated with new construction. "I applaud Sen. Talent for introducing this priority legislation in the Senate," said U.S. Department of Housing and Urban Development Secretary Alphonso Jackson. "I want to offer my full support and urge prompt Senate consideration of this bill that would introduce a new, modern-era FHA and offer hard-working American families a variety of safe homeownership options at a fair price." National Association of Mortgage Brokers Past President A.W. Pickel III, CMC testified about the importance of these loans before a subcommittee of the U.S. Senate Committee on Banking, Housing and Urban Affairs. He said that this type of loan is vitally important at a time when interest rates are on the rise and home prices in some areas of the country are still climbing. "If we really believe that homeownership is a priority in our country, we need to make sure that consumers have access to loans that can help make this belief a reality," said Pickel. "The demand for homes continues to outpace new housing development and sales of existing homes, causing escalation of home prices. FHA loans are a critical component in addressing this issue." Pickel also said that increasing access to loans insured by the FHA will help low- to moderate-income homebuyers take advantage of the safer and less expensive financing options provided through the program. The Mortgage Bankers Association (MBA) also supports S. 3535. "MBA believes that revitalization of FHA is significantly closer to being a realityand a reality that will help many underserved Americans achieve the dream of homeownership," said Regina M. Lowrie, CMB, chair of MBA and president of Gateway Funding Diversified Mortgage Services. "MBA commends Sen. Talent and his co-sponsors for their commitment to FHA and looks forward to working with the Senate to pass much needed FHA reform." Key provisions of S. 3535 that relate to single-family mortgage insurance include: - Allowing the FHA to insure mortgages with maturities of up to 40 years; - Eliminating the three percent down-payment requirement and instead allowing the FHA to determine an appropriate down payment for each borrower; - Allowing the FHA more flexibility to establish various mortgage premium structures on mortgages secured by one to four family dwellings. - Specifically, the FHA may collect a single insurance premium prior to insuring the mortgage, collect periodic payments over the life of the mortgage or collect both without regard to the National Housing Act's current maximum premium amounts; - Allowing the FHA to insure up to the full median house prince in an area rather than 95 percent of the median house price; - Allowing the FHA to insure certain Home Equity Conversion Mortgages; and - Allowing the FHA to insure a larger pool of rehabilitation loans. The bill also includes similar provisions related to manufactured housing mortgage insurance and condominium insurance. For a copy of S. 3535, visit
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