The world of credit: Return on investment

The world of credit: Return on investment

November 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
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
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
- 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
The bill also includes similar provisions related to
manufactured housing mortgage insurance and condominium
For a copy of S. 3535, visit